Conference Special

:00:46. > :00:49.Afternoon, folks. Welcome to this two-hour daily politics special on

:00:50. > :00:56.the Tory Party conference in Birmingham. We are on from now

:00:56. > :00:59.until one owe owe -- 1.00. We will bring you the Chancellor's

:00:59. > :01:02.address live and uninterrupted. George Osborne says he will make

:01:02. > :01:06.sure the rich pay their fair share as he prepares to cut welfare

:01:06. > :01:11.spending by another �10 billion after the election. Will there be a

:01:11. > :01:13.new tax on the rich? And exactly where will the welfare axe fall?

:01:13. > :01:17.David Cameron says he wants Britain to renegotiate its relationship

:01:17. > :01:21.with the rest of Europe and that fresh consent from the British

:01:21. > :01:27.people will be sought. But does the party think the Prime Minister

:01:27. > :01:31.should commit to a referendum now? We need a referendum on the euro as

:01:31. > :01:36.soon as possible but the key issue is it should be a proper referendum,

:01:36. > :01:42.in or out. We will be talking about that bungled rail franchise deal

:01:42. > :01:47.that's going to cost taxpayers tens of millions of pounds. The

:01:47. > :01:52.Transport Secretary, Patrick McLoughlin, joins us. We will be

:01:52. > :01:56.asking Philip Hammond if the Government has any hope of sticking

:01:56. > :01:59.to its plans for balancing the nation's books.

:01:59. > :02:03.All that's in the next two hours. With us for the duration Norman

:02:03. > :02:07.Fowler, a member of Margaret Thatcher's Cabinet back in the day,

:02:07. > :02:10.now a member of the House of Lords. Welcome. Thank you very much.

:02:10. > :02:14.start with George Osborne's speech. We are told he will be on his feet

:02:14. > :02:19.before noon but he's already been a busy boy this morning, setting the

:02:19. > :02:24.scene making it clear that he needs to find another �10 billion in

:02:24. > :02:29.savings from the welfare bill from the year 2015 onwards. This is what

:02:29. > :02:33.he had to say earlier. Conservative Party, the modern

:02:33. > :02:37.Conservative Party, is on the side of people who want to work hard and

:02:37. > :02:41.get on and we are very clear that dealing with these enormous debts

:02:41. > :02:45.this Government inherited has to be done fairly, that the rich have to

:02:45. > :02:50.pay the greatest share. But it's an illusion to think that you can

:02:50. > :02:53.leave in tact a very expensive welfare state where some people are

:02:53. > :02:56.better off, not in work, than going out and looking for work and that's

:02:56. > :03:00.precisely what we are tackling and people watching your programme this

:03:01. > :03:05.morning who are getting up, getting ready to go out to work, are angry

:03:05. > :03:08.at the fact that some of their taxes are going to support those

:03:08. > :03:14.who enjoy a lifestyle on benefits which, frankly, they wouldn't be

:03:14. > :03:18.able to enjoy in work. Mr Osborne going there for welfare

:03:18. > :03:22.t plays well in the focus groups in the opinion polls. This is a

:03:22. > :03:28.Chancellor that's got to rescue his credibility, hasn't he? One of the

:03:28. > :03:32.worst received Budgets in living memory and the Tories poll position

:03:32. > :03:35.has not recovered since. Inevitably that's the case, perhaps not

:03:35. > :03:38.inevitably, but it is the case and we have been going through a rough

:03:38. > :03:42.period for one reason or another. It's interesting what he is saying

:03:42. > :03:46.about welfare and the joint position of Iain Duncan Smith and

:03:47. > :03:50.the Chancellor on this. It's going to be very difficult. I used to be

:03:50. > :03:55.social security Secretary for six years. I went all through this with

:03:55. > :03:59.Nigel Lawson. The only thing one hopes is that it doesn't get in the

:03:59. > :04:03.way, it doesn't devalue the universal credit which is going to

:04:03. > :04:07.come in, which is a major reform. Treasury aren't particularly

:04:07. > :04:10.interested in social reform, they just want the money but this is

:04:10. > :04:15.rather important reform that's taking place and it would be a

:04:15. > :04:19.great shame if it got tarred by saying this is simply a money-

:04:19. > :04:23.cutting exercise, which it isn't. Although the Chancellor and Mr Iain

:04:23. > :04:28.Duncan Smith wrote a joint article this morning in The Mail, we know

:04:28. > :04:31.they've been at loggerheads. We know there's been a huge battle

:04:31. > :04:36.between the Treasury and Department of Work and Pensions over welfare.

:04:36. > :04:38.It's inevitable. Having done it with Nigel Lawson, I tell you it's

:04:38. > :04:44.absolutely inevitable. The Treasury want as much money as they can get

:04:44. > :04:48.out of the welfare budget and for many good reasons at times. But I

:04:48. > :04:52.think battles between the social security Secretary and the

:04:52. > :04:59.Chancellor, you should only be surprised if there aren't such

:04:59. > :05:04.battles. I had horrendous battles with Nigel Lawson. We took - major

:05:04. > :05:07.proposition off the cabinet table and postponed a whole meeting

:05:07. > :05:13.because Nigel in his usual way put in something like, could we have an

:05:13. > :05:18.extra �2 billion at 24 hours' notice. So these kind of battles

:05:18. > :05:22.inevitably take place. It's what happens after that. If anyone kind

:05:22. > :05:27.of comes along and says that's not the case that's rubbish. The other

:05:27. > :05:32.thing I think about welfare is this, we always talk about the young

:05:32. > :05:37.people and young people and certainly it's the case they must

:05:37. > :05:47.be encouraged into work. We should also remember that things have

:05:47. > :05:48.

:05:48. > :05:53.changed since skaf Beveridge's time. People are retired. We should look

:05:53. > :06:00.at that area. Politicians and Chancellors and Prime Ministers,

:06:00. > :06:07.don't much like looking at that. Good to have you here. Let's get a

:06:08. > :06:11.sense of the mood at conference and talk to to -- Polly Toynbee and

:06:11. > :06:15.Peter Oborne. What does David Cameron need to do this week.

:06:15. > :06:20.of all he has to unite his party. They're fractious here, the way

:06:20. > :06:23.parties are when they're not doing well. If you are falling in the

:06:23. > :06:27.polls, you see virtually no sign of being able to improve your position

:06:27. > :06:30.at the next election because no sitting Government has ever

:06:30. > :06:35.improved its position while in power. So they look as if they're

:06:35. > :06:38.destined to either coalition again, which they hate, or to failure. So,

:06:38. > :06:41.inevitably there is a lot of arguments going on. He needs to

:06:41. > :06:45.talk to his party, but of course he needs to talk to the people and

:06:45. > :06:48.needs to perspwaeud them -- persuade them he is the nice man

:06:48. > :06:52.they thought they had elected. Difficult in the face of these

:06:52. > :06:58.incredible cuts which run against any notion of compassion. OK, Peter,

:06:58. > :07:04.what about answering Ed Miliband last week who, broadly, consensus

:07:04. > :07:07.was he did a good job? Yes, I rather disagree with what Polly is

:07:07. > :07:13.saying there, I think David Cameron has to do more than unite his party.

:07:14. > :07:19.He has to stand up to his party. He has to say, look, let's go back to

:07:19. > :07:23.the decent, honest vision we brought into politics in 2010.

:07:23. > :07:29.Let's stand up for the coalition, stand up for the big society, let's

:07:29. > :07:35.say that - point out the real one nation party is David Cameron's

:07:35. > :07:39.Conservatives and not Ed Miliband's audacious attempt to grab the

:07:39. > :07:44.middle ground last week F he does what some people, most people may

:07:44. > :07:48.be want, and lurches off into the right, I think he will cause

:07:48. > :07:53.himself short-term gain but a lot of long-term trouble. On that issue,

:07:53. > :07:56.we have been talking about welfare cuts. Nothing new there. They're

:07:56. > :08:00.talking again about this ten billion savings and it's populist,

:08:00. > :08:05.would that help regain the credit ground or is that slipping to the

:08:05. > :08:14.right? Before answering that, can we point out Norman Fowler you had

:08:14. > :08:20.on earlier was was probably - many of the problems the welfare states

:08:20. > :08:26.faces today are down his total failure to grasp the issues. Thank

:08:26. > :08:36.you very much, Peter! Yes, you were useless, Norman. All right, let's

:08:36. > :08:40.concentrate on today. It is very odd, something has happened here

:08:41. > :08:47.which is that we had IDS, Iain Duncan Smith, at loggerheads with

:08:47. > :08:51.the Treasury and he has agreed, has he? I would like to see what they

:08:52. > :08:56.the cuts are. One thing Norman Fowler said I agreed with, he has

:08:56. > :09:00.to keep that universal credit and if he doesn't, this programme of

:09:00. > :09:05.welfare reforms is finished. presumes on that basis that Iain

:09:05. > :09:10.Duncan Smith has been persuaded that that measure of cuts can now

:09:10. > :09:15.be taken from the welfare budget but is it just rhetoric? Will they

:09:15. > :09:19.be found even if Iain Duncan Smith has agreed to it? I am sure that

:09:19. > :09:23.now he's agreed they will be found and I am sure that they've

:09:23. > :09:30.earmarked whatever they are. We have to remember is that the �18

:09:30. > :09:33.billion already cut is according to the institute for fiscal studies by

:09:33. > :09:38.almost any historical or international comparison the

:09:38. > :09:43.biggest cut anyone has made, another �10 billion? A lot of them

:09:43. > :09:46.haven't come in yet. Next April there is going to be when the

:09:46. > :09:49.disability cuts come in, when two thirds of families with disabled

:09:49. > :09:54.children lose their disability living allowance altogether. When

:09:54. > :09:58.large numbers of people lose their mobility, that means their mobility

:09:58. > :10:04.scooters are going to be repossessed. At the same time,

:10:04. > :10:08.council tax benefits o comes in for the first time, very like the poll

:10:08. > :10:12.tax, collecting small sums of money from large numbers of poor people

:10:12. > :10:16.who won't and can't pay. At that point popular opinion is going to

:10:16. > :10:21.turn around and they're going to say these cuts weren't a good idea

:10:21. > :10:25.after all. One of the other issues that's is in danger of splitting

:10:25. > :10:29.the Tory Party is the issue of Europe. David Cameron seems to have

:10:29. > :10:32.ruled out an in-out referendum, somehow that going down? I don't

:10:32. > :10:38.know actually. I haven't sort of sussed out what's going on. He

:10:38. > :10:41.would have been completely mad to give in to calls for a referendum.

:10:41. > :10:45.I think he needs one of the messages the Prime Minister must

:10:45. > :10:50.get across this week is that we have got a national economic crisis.

:10:50. > :10:57.We have got a really serious programme of Government reforms in

:10:57. > :11:01.education and welfare. You lurch off into some mad-Referendum at a

:11:01. > :11:07.time of massive distraction from politics on a domestic level, he

:11:07. > :11:13.would have lost the plot. What about palpable excitement of Boris

:11:13. > :11:20.Johnson's arrival? Well, you know, he's fun. He makes people laugh.

:11:20. > :11:25.They'll enjoy him. He will be preposterous and outrageous, I

:11:25. > :11:28.don't think he is much trouble to Cameron right now. He is not even

:11:28. > :11:36.in in parliament, let alone in the cabinet and I don't think this

:11:36. > :11:39.party is crazy crazy - he is standing in the wings looking

:11:39. > :11:44.rather glamorous, popular after the Olympics, as if he had run the

:11:44. > :11:49.Olympics, which he didn't. And he is an irritant but I don't think

:11:49. > :11:54.it's serious, it doesn't seem there is an important idea logical

:11:54. > :11:58.difference. They're cut from the same cloth. Do you agree or is

:11:58. > :12:04.there more worry and fear at the centre of the Number 10 operation

:12:04. > :12:09.about Boris Johnson's popularity? This is one of the great non-

:12:09. > :12:13.stories of our time, the Boris Johnson versus David Cameron story.

:12:13. > :12:16.The fact are he is not an MP. He is the Mayor of London. He won't

:12:16. > :12:21.become an MP until sometime after the Prime Minister steps down.

:12:21. > :12:26.Where I think there is a potential in this hypothetical scheme of this

:12:26. > :12:29.non-story, a potential issue is between saying Boris Johnson and

:12:29. > :12:34.George Osborne, which ever other leadership contender emerges after

:12:34. > :12:43.David Cameron. But this is one of the great fabrications, a space

:12:43. > :12:49.filler, it's no reality. Tpwu works well. Thank you both very much.

:12:49. > :12:56.We need to let Norman Fowler respond to that unprovoked and some

:12:56. > :13:00.may say unnecessary attack. He is repraising his performance on

:13:00. > :13:05.Newsnight. What would you like to say? I have always made it a rule

:13:06. > :13:10.in political life never to take the slightest bit of notice of Peter

:13:10. > :13:15.Oborne. It's a mutual love affair. What's the history to that, why did

:13:15. > :13:23.he decide to have a go at you at a position you held years ago?

:13:23. > :13:27.think it's all personal. It's really important! Absolutely no

:13:27. > :13:32.idea. The one point I would make about my period is that if the

:13:32. > :13:37.Government had taken my advice and taken my proposals back in the

:13:37. > :13:41.1980s and we had abolished the second pension, the second state

:13:41. > :13:44.pension and had a compulsory private pension, we would be in a

:13:44. > :13:49.much better public spending position today and that's why I am

:13:49. > :13:54.very anxious that when we come to the public spending and the welfare

:13:54. > :13:58.cuts now that we don't make the same mistake and we forget about

:13:58. > :14:04.the reform. OK, we won't put you and Peter together, or maybe we

:14:04. > :14:08.should! I think we will! It's time for our daily quiz and this weekend

:14:08. > :14:14.David Cameron has finally joined the micro-blogging site Twitter.

:14:14. > :14:20.But so far he is not following many other people, not tpoting me, yet.

:14:20. > :14:30.Why not? I have sent him a note. Shall I have a word with him?

:14:30. > :14:36.

:14:36. > :14:39.At the end of the show Norman Fowler will give us the kregt

:14:39. > :14:46.answer. -- correct answer. You have time to think about it! Do you know

:14:46. > :14:52.the right answer? Don't tell us. So, just over half an hour to the

:14:52. > :14:55.Chancellor's big speech. We can talk to Mr Osbourne's cabinet,

:14:55. > :15:00.Philip Hammond, the Defence Secretary. He's turned up on time

:15:00. > :15:04.today, unlike yesterday! I do occasionally, Andrew. It's not like

:15:04. > :15:08.you have police outriders to get you, oh, you do and you were still

:15:08. > :15:11.late. Never mind. I have only come from the hotel across the way.

:15:11. > :15:15.have people with blue lights getting you over there, too. Let's

:15:15. > :15:18.get down to business and follow up what I wanted to do yesterday. Mr

:15:18. > :15:23.Os Osbourne is making it clear, it was in the red book but he is

:15:23. > :15:29.talking openly about it, that he needs another �10 billion in in

:15:29. > :15:39.welfare cuts. Has he shared with cabinet colleagues any idea of how

:15:39. > :15:41.

:15:41. > :15:45.$:STARTFEED. He and Iain Duncan Smith had extensive discussions

:15:45. > :15:50.about how they are going to take forward an an agenda which

:15:50. > :15:53.addresses the fairness question and the affordability question. Taking

:15:53. > :15:57.out another substantial chunk of cost from the welfare budget, costs

:15:57. > :16:02.that was pushed into that budget during the period of the Labour

:16:02. > :16:05.Government simply isn't affordable and doing it in a way that supports

:16:05. > :16:10.our fairness agenda. Addressing the questions that have been

:16:10. > :16:13.articulated this week about the fairness of people who are not in

:16:13. > :16:17.work, being able to afford and enjoy lifestyles that people who

:16:17. > :16:20.are in work frankly would struggle to afford.

:16:20. > :16:23.I understand that and that's the principle behind it, but that's not

:16:23. > :16:29.what I asked you. I asked you how is the �10 billion going to be make

:16:29. > :16:34.up? Do you have any inkling of where the cuts will come? Well, for

:16:35. > :16:39.example, we have already floated the question as to whether young

:16:39. > :16:45.people leaving school should be able to receive housing benefit

:16:45. > :16:49.before they have been in the workplace. Whether there should be

:16:49. > :16:52.a minimum age threshold for accessing housing benefit, trying

:16:52. > :16:56.to ensure that people who are out of work, with the support of

:16:56. > :16:59.benefits, enjoy a lifestyle no better, no more generous than

:16:59. > :17:04.people who go out to work and earn their living.

:17:04. > :17:08.But is this... It is one area that we will be looking at.

:17:08. > :17:11.But you are only looking at. Are you only floating ideas for the �10

:17:11. > :17:15.billion? Are we going to have a national debate about it or do you

:17:15. > :17:23.have any plans? The �10 billion is a clear figure.

:17:23. > :17:27.It won't be achieved until 2016/17. So there is time for Iain Duncan

:17:27. > :17:31.Smith as the Secretary of State responsible to work out proposals

:17:31. > :17:36.to consult as necessary, to introduce any legislation or

:17:36. > :17:39.regulations that are required to ensure that by the time we get to

:17:40. > :17:46.2016/17 we have taken out a further �10 billion.

:17:46. > :17:50.But hold on... Did it in a way that's consistent with our broader

:17:50. > :17:58.objectives of fairness and making sure that work work pays.

:17:58. > :18:04.The Chancellor told us these cuts have to start in 2015? 2015/16, the

:18:05. > :18:13.the �10 billion is the 16/17 Budget figure. It will build up through

:18:13. > :18:19.15/16 to �10 billion in 2016/17. So you have to start the cuts in

:18:19. > :18:22.2015/16 and they will Total �16 billion? No, �10 billion.

:18:22. > :18:26.In welfare, but he has to find savings of �16 billion? That's

:18:26. > :18:31.right. That's right. Where is the other �6 billion going to come

:18:31. > :18:34.from? The Chancellor made made very clear, the welfare figure that he

:18:34. > :18:41.has identified is based on the assumption that across the

:18:41. > :18:44.remainder of Government on average, departments continue the percentage

:18:45. > :18:49.rate of reduction in budget that they have had over this Spending

:18:49. > :18:53.Review period. It means extending the squeeze on departmental budgets

:18:53. > :18:58.by one further year into 15/16 and then delivering these welfare

:18:58. > :19:02.savings on top of that. The Chancellor and the Prime

:19:02. > :19:05.Minister have said that the rich are paying their fair share at the

:19:05. > :19:12.moment and should continue to pay their fair share, but does this

:19:12. > :19:16.mean that there will be new specific measures on the rich to

:19:16. > :19:21.pay more or they will just continue to pay what they pay?

:19:21. > :19:26.Well, let's be clear, first of all. The rich are paying a higher share

:19:26. > :19:31.of taxes in this country every year than they were in any year under

:19:31. > :19:35.the 13 years of a Labour Government and that's even after we've

:19:35. > :19:40.abolished the damaging 50 pence rate of tax. So the rich are paying

:19:40. > :19:44.a higher share and they will go on paying a higher share. That's

:19:44. > :19:50.because everybody else's salary has frozen. That's only because average

:19:51. > :19:54.earnings are static? No, I don't think so. It is because

:19:54. > :19:58.George Osborne introduced additional taxes which hit the rich.

:19:58. > :20:05.Over every Budget this chancellor has presented to Parliament, has

:20:05. > :20:09.increased the share of taxes paid by the rich. So will there be more

:20:09. > :20:12.measures? Well, let me just finish this point. This is the most

:20:12. > :20:16.important specific measure. It is about making sure that people on

:20:16. > :20:21.high incomes or people with high wealth pay the tax that they are

:20:21. > :20:26.supposed to pay. It is about clamping down on aggressive

:20:26. > :20:29.avoidance and evasion and we have made massive strides in that area

:20:29. > :20:34.where Labour over 13 years failed to do anything effective at all. So

:20:34. > :20:37.the rich are paying a higher share. Tax evasion and avoidance will

:20:38. > :20:40.continue to be clamped down on and that means the rich will go on

:20:40. > :20:45.paying a higher share of the total tax bill.

:20:45. > :20:52.Well, we know what he ruled out. He ruled out a mansion tax. He ruled

:20:52. > :20:56.out a wealth tax. He ruled out new council tax bands. So what is left

:20:56. > :21:02.if he wants to do something additional? There there be

:21:02. > :21:06.something additional or not or is it just the old chestnut of tax

:21:06. > :21:11.avoidance? It is not an old chestnut, by the way. We have

:21:11. > :21:14.brought in over the life of this Spending Review, we will have

:21:14. > :21:19.collected something like an additional �18 billion by clamping

:21:19. > :21:24.down on tax evasion and aggressive tax avoidance.

:21:25. > :21:28.By doing what governments are meant to do, collect tax? And what the

:21:28. > :21:32.last Government failed to do over 13 years so we are tackling that

:21:32. > :21:36.problem. We have grasped it and we are dealing with it. As far as

:21:36. > :21:39.additional and any additional or new taxes or changes in rates are

:21:39. > :21:43.concerned that is a matter for the Chancellor that he will announce in

:21:43. > :21:48.his Budget in the usual way. Do you accept that if he is to get

:21:48. > :21:53.the support of the Lib Dems for �10 billion in welfare cuts that he has

:21:53. > :21:59.to come up with something more more for taxing the better off? Yes or

:21:59. > :22:05.no? No, I think what the Lib Dems will want to see is a fair solution

:22:05. > :22:09.where they are assured that at each turn of the handle those most able

:22:09. > :22:16.to pay are contributing an appropriate share and that the

:22:16. > :22:21.rich... What will the next turn of handle be on the rich? You are

:22:21. > :22:25.going to take �10 billion away from the poor people in society. What's

:22:25. > :22:29.the next turn of handle for the rich in the society? We are going

:22:29. > :22:33.to remove costs that are no longer affordable that was put in there by

:22:33. > :22:38.the Labour Party who increased welfare spending by �75 billion a

:22:38. > :22:42.year. That was money the country never could afford... Mr Hammond

:22:42. > :22:45.you are not not answering my question. Could you please answer

:22:45. > :22:49.the question, it is only right? I can't speak for the Liberal

:22:49. > :22:53.Democrats, but I know that the Liberal Democrats regard as very

:22:53. > :22:59.important the continuing raising of the lower threshold four income tax.

:22:59. > :23:02.A measure which helps those who are working on relatively low incomes

:23:02. > :23:06.very significantly. I would expect the Liberal Democrats to want to be

:23:06. > :23:09.reassured that we're going to be able to continue to pursue that

:23:09. > :23:17.agenda as part of the chancellor's overall package.

:23:17. > :23:22.I know you have to go. I want to ask you major defence merger. You

:23:22. > :23:25.must have a huge interest in this. As it stand this is Monday morning,

:23:25. > :23:29.the decision has to be taken by Wednesday. Does it look to you as

:23:29. > :23:33.if this merger is going to go ahead or not? Well, the decision that has

:23:33. > :23:37.to be taken by Wednesday, by the company, is whether they feel they

:23:37. > :23:41.are close enough to getting agreement between the the

:23:41. > :23:43.shareholders on both sides, between the two companies, between the four

:23:43. > :23:49.governments including the US Government that are involved in

:23:49. > :23:52.signing off this deal. Whether they are close enough to make it worth

:23:52. > :23:57.asking the Stock Exchange to extend the deadline. I don't think there

:23:57. > :24:02.is any chance of getting the deal done by Wednesday, but the company

:24:02. > :24:07.will make the call tomorrow whether it wants to apply for an extension

:24:07. > :24:11.of Government. -- extension of of time.

:24:11. > :24:14.The French Government having 9% of the merged group. The German

:24:14. > :24:17.Government having 9%, but the British Government, the British

:24:17. > :24:21.people would have none. Is that your position?

:24:21. > :24:26.Well, it depends on the other protective arrangements put in

:24:26. > :24:29.place. We will want to make sure that British jobs, British

:24:29. > :24:35.interests, British defence interests... What's the the answer

:24:35. > :24:38.to my question, Mr Hammond? think it could be done with a

:24:38. > :24:41.reduced French Government stake. If the French Government is prepared

:24:41. > :24:45.to reduce its stake and dismantle arrangements which have given it

:24:46. > :24:49.the ability to control the company then with the addition of

:24:49. > :24:52.safeguards, and national security agreement for example, safeguards

:24:52. > :24:56.about where the business will be headquartered, what the composition

:24:56. > :25:00.of the board will be, we think it will be possible... So the French

:25:00. > :25:04.Government will have a stake in this new entity, but the British

:25:04. > :25:08.will not? Is that your your position? The French Government has

:25:08. > :25:14.a very large stake at the moment. Our position is that they will have

:25:14. > :25:19.to make a considerable reduction... But we won't take a stake, and the

:25:19. > :25:22.French will still have one. It is a simple question and it demands a

:25:22. > :25:25.simple answer for our biggest manufacturing company in this

:25:25. > :25:29.country. The French will continue to have a stake and the Germans, we

:25:30. > :25:34.won't. Is that the British position? As long as that stake

:25:34. > :25:38.does not give them effective control or an ability to interfere

:25:38. > :25:42.in the management of the company and that means it has to be below'

:25:42. > :25:47.certain level, putting them on a par with big institutional

:25:47. > :25:50.investors who will own significant single digit percentage stakes in

:25:50. > :25:54.the merged group. What we can't have is this business going forward

:25:54. > :26:04.with the French or the German State able to direct its activity. That

:26:04. > :26:05.

:26:05. > :26:09.would not be acceptable. OK, Mr Hammond, thank you.

:26:09. > :26:14.What we have heard from the Defence Secretary, the British want the

:26:14. > :26:18.French, the French and the Germans have 15%, maybe more each at the

:26:18. > :26:22.moment and what he is saying, if they come down to 9%, we will

:26:22. > :26:25.accept that. So the French would have 9%, the Germans would have 9%,

:26:25. > :26:29.we would have none. Does that seem sensible to you?

:26:29. > :26:34.I thought what Philip was saying was actually sensible because what

:26:34. > :26:40.he is trying to say is, what he was saying effectively, was that we

:26:40. > :26:43.shouldn't get into a position where the French and indeed the German

:26:43. > :26:47.stake overwhelmed the company to the point that they had control.

:26:47. > :26:51.That's the point... Between them they would 18% and the British

:26:52. > :26:54.Government would have zero percent. That's my point? I understand the

:26:54. > :26:58.point you are making. All right.

:26:58. > :27:04.It wouldn't be a Tory Party conference if we didn't talk about

:27:04. > :27:07.Europe. So don't worry, we will! David Cameron has dangled the

:27:07. > :27:13.prospect of a referendum on Europe, but not now. The Prime Minister is

:27:13. > :27:18.out to appease Tory Euro-sceptics, but the delay of his words

:27:18. > :27:21.infuriates them. Adam has been doing his referendum with the Daily

:27:21. > :27:25.Politics Balls. Let's test the mood on this idea of

:27:25. > :27:29.a European referendum. Specifically the timing. Would delegates like to

:27:29. > :27:33.have one later as David Cameron has suggested or go ahead and get on

:27:33. > :27:38.with it now? We need to wait and see what happens in places like

:27:38. > :27:44.Greece, Italy, Ireland, and possibly Germany as well before we

:27:44. > :27:50.make any decisions really. We have had our first ball in the

:27:50. > :27:53.no box, but the lady who did it wanted to do it anonymously.

:27:53. > :27:59.want to see a different European Union not the sort we have got now,

:27:59. > :28:02.but is that enough to say we should be altogether? That's why it is the

:28:02. > :28:07.wrong time to ask it. It is not the best time to be

:28:07. > :28:14.worrying about who is in the EU. I am in a rush. It takes ten

:28:14. > :28:21.seconds. If it stops people people voting

:28:21. > :28:26.for UKI. We don't need the infighting and

:28:26. > :28:29.let's get on with running the country. Hi, Andrew, great show.

:28:29. > :28:39.REPORTER: Do you trust David Cameron to deliver a referendum

:28:39. > :28:40.

:28:40. > :28:43.now? Not in the month ever Sundays! Would you like to vote? Du want to

:28:43. > :28:49.have it sooner than the Prime Minister Prime Minister sounds like

:28:49. > :28:54.he wants to have it? I think it has got to be in the fullness of time.

:28:55. > :29:04.How about that? Nice and vague. Oh, that's the no box.

:29:05. > :29:16.

:29:16. > :29:20.When should the EU referendum be, I think we need a referendum on the

:29:21. > :29:24.EU as soon as possible, but the key issue is it should be a proper

:29:24. > :29:27.referendum, in or out. David Cameron wants it to be later,

:29:27. > :29:32.doesn't he? I am not sure what David Cameron wants. The position

:29:32. > :29:37.is developing, but I think sooner or later it will have to be in or

:29:37. > :29:39.out and I look forward to that. When would you like to have it?

:29:39. > :29:44.Today. This afternoon would be convenient.

:29:44. > :29:47.I found a red ball. How did that get in there? Secretary of State,

:29:47. > :29:50.would you like to do our Daily Politics survey? Do you remember

:29:50. > :29:54.the days when you were on the Daily Politics every day? I do pretty

:29:54. > :29:59.much, yeah. Good. Happy memories then. When

:29:59. > :30:02.shall we have the EU referendum, now or later? We have Not had the

:30:02. > :30:07.chance to vote for several years. Give us the chance now.

:30:07. > :30:10.In the end, it looks like a small majority have sided with David

:30:10. > :30:20.Cameron and feel now is not the time for an EU referendum, but it

:30:20. > :30:32.

:30:32. > :30:38.Let's talk to Mark Reckless and Richard Ashworth. You want a

:30:38. > :30:42.referendum but David Cameron has ruled out an in-out referendum.

:30:42. > :30:45.want a referendum sooner than later and I think it's important that's a

:30:45. > :30:50.real referendum that gives people a choice as to whether they want to

:30:50. > :30:53.stay part of the EU and that's what I want to see. Sooner rather than

:30:53. > :30:56.later and a real referendum on EU membership. You are not going to

:30:56. > :31:02.get either of those, are you? David Cameron made it clear he doesn't

:31:02. > :31:06.want it on in-out and doesn't want it now. Well, I think it has to

:31:06. > :31:10.give people the opportunity choose whether or not we stay part of it.

:31:10. > :31:15.Whether the other side of that referendum is the status quo or

:31:15. > :31:19.something new with a eurozone or a few powers back, I think that

:31:19. > :31:22.question is open. But I don't think we can go to the next election

:31:22. > :31:26.saying we are going to try and persuade the other 26 countries to

:31:26. > :31:31.let srus a few powers back and by the way, if you vote Conservative

:31:31. > :31:36.we are going to take that as your consent to stay in the EU. So David

:31:36. > :31:41.Cameron's making a mistake by not offering a substancive referendum

:31:41. > :31:47.before 2015? Well, I don't think the policy is entirely clear at the

:31:47. > :31:51.moment. I think it is. If you listen to David Cameron, he said I

:31:51. > :31:55.think the trouble with the straight yes or no is we stand today is I am

:31:55. > :32:00.not happy with the status I do so I don't want to say yes to that but I

:32:00. > :32:04.don't think would be right to leave right now. No referendum on in-out

:32:04. > :32:08.and no referendum on sooner rather than later. As we go into the next

:32:08. > :32:12.election and the European election for Richard, we will hope to be

:32:12. > :32:16.clearer about what our policy is. I think, if David Cameron's able to

:32:16. > :32:20.go in there and try and get powers back, if we can say to the civil

:32:20. > :32:25.service by the way, the people are going to get a vote on whether we

:32:25. > :32:27.stay in on that base to say will be a inkrepb I have to try and get

:32:28. > :32:32.powers back. The key thing is ultimately the Conservative Party

:32:32. > :32:36.has to allow the people of Britain a choice as to whether we stay in

:32:36. > :32:39.the EU or we become an independent country again trading with Europe

:32:39. > :32:45.but governing ourselves. On that last point do you agree there has

:32:45. > :32:49.to be at some stage, preferably before 2015 a referendum on whether

:32:49. > :32:53.we stay in or leave? It's difficult to determine the timing of a

:32:53. > :32:57.referendum. Indeed the way that you will do it. The Prime Minister was

:32:57. > :33:00.exactly right when he said in November we have got some very

:33:00. > :33:07.critical negotiations about the seven-year budget. Shortly after

:33:07. > :33:11.that we have got the negotiations for the 17 eurozone countries to

:33:11. > :33:16.integrate more. Now, that's an opportunity for the United Kingdom

:33:16. > :33:18.to redefine our relationship. It would be wrong, therefore, for us

:33:18. > :33:23.to prejudice Britain's position going into those negotiations by

:33:23. > :33:28.having a very early referendum but more to the point, you wouldn't

:33:28. > :33:31.know what kind of Europe and who kind of relationship with Europe

:33:31. > :33:41.you are describing to the British people without having that

:33:41. > :33:42.

:33:42. > :33:48.negotiation first. Not now... you advising David Cameron use his

:33:48. > :33:54.veto? I am certain he will, there are big issues the United Kingdom

:33:54. > :33:58.can't agree to, inkraoezing size of the budget, abolition of rebate, I

:33:58. > :34:06.am certain the veto will will be used if they come up. Are you

:34:06. > :34:10.saying no to an in-out referendum? It's not as easy as that. Why not?

:34:10. > :34:13.Because the Prime Minister now has the opportunity to redefine

:34:13. > :34:17.Britain's relationship with the European Union. Actually if you

:34:17. > :34:22.said to the people, do you want a trading relationship with a very

:34:22. > :34:26.important trading partner, which does not involve degracious,

:34:26. > :34:30.actually -- integration, gives us the opportunity to bring some

:34:30. > :34:40.powers back from Brussels. That's the position Wye like to be.

:34:40. > :34:42.

:34:42. > :34:44.need to wait, we need to know what we are dealing with and what sort

:34:44. > :34:48.of Europe there's going to be before we have a referendum on what

:34:48. > :34:50.we don't know? I think it's a fair point that Europe is in a state of

:34:50. > :34:53.flux. The important thing for me is once we have had those negotiations

:34:53. > :34:57.that then the people get an opportunity to decide whether we

:34:57. > :35:00.want to stay in the EU on that basis or whether we prefer a

:35:00. > :35:03.relationship more like that of Switzerland where they sort of

:35:03. > :35:09.trade freely with the EU but they're not part of the

:35:09. > :35:12.institutions, they're only paying a small amount towards it. Their

:35:12. > :35:17.people can govern themselves. you like Britain to be like

:35:17. > :35:20.Switzerland? No, I wouldn't. Firstly, because Britain isn't like

:35:20. > :35:24.Switzerland, we are a bigger nation. We have a different kind of economy.

:35:24. > :35:27.We play a bigger part in the world. I would like to have far more say

:35:27. > :35:31.in Europe than Switzerland does, for example. I don't see the

:35:31. > :35:35.attraction of that. I don't see the attraction of a major manufacturing

:35:35. > :35:38.nation like Britain having to be like Norway or Switzerland, waiting

:35:38. > :35:42.to find out what the regulations are Brussels are imposing and then

:35:42. > :35:47.having to apply them all to the letter, to the word, without any

:35:47. > :35:52.say. Also, may I say, making every bit as big a contribution to the

:35:52. > :35:57.funding of the European Union as we do, as members. There you go, Mark

:35:57. > :36:02.Reckless. Well, I think the Norwegian and Swiss contributions

:36:02. > :36:06.are significantly smaller than ours, but... I am sorry, they're not.

:36:06. > :36:09.am sure we can look at the numbers after this. What I would like to

:36:09. > :36:13.say is in Switzerland, as in the United States or Japan, for

:36:13. > :36:17.instance, if you want to export to the EU you have to meet EU

:36:17. > :36:20.regulations on your exports to the EU. They don't have to apply all

:36:20. > :36:24.those EU regulations to their exports outside the EU and their

:36:24. > :36:29.own domestic economy. I just think economically we could be so much

:36:29. > :36:35.better off if we weren't paying �19 billion a year for the privilege of

:36:35. > :36:38.having 26 other countries make our laws for us. That is a gross cost,

:36:38. > :36:44.without the money that you get back, for example, to regional funding

:36:44. > :36:46.and to the common agricultural policy so the net cost is not

:36:46. > :36:50.anything like that. But the contribution per person is about

:36:50. > :36:55.the same as the contribution per person from Norway. Why else would

:36:55. > :36:58.the European Union allow somebody else to have a free ride if

:36:58. > :37:02.Britain's to have a free ride, then the poles and Germans or French

:37:02. > :37:06.would say we will have a free ride, too. Because they sell more to us

:37:06. > :37:10.than we do to them and they sell almost as much to Britain as to the

:37:10. > :37:14.United States and Japan together T would be highly unusual for people

:37:14. > :37:19.selling that much to want to cut off perhaps their most important

:37:19. > :37:23.partner. The critical point of that argument is it is 50% of our trade

:37:23. > :37:27.but to the whole of the European Union we are 11% of their trade. So

:37:27. > :37:30.you are hardly having an even debate. Fascinating though this is,

:37:30. > :37:34.about the economics of it, the politics is clearly demonstrated by

:37:34. > :37:41.the two of you, that the issue would split the party. Do you want

:37:41. > :37:44.that? Well, what we should do is just allow the people to decide on

:37:44. > :37:50.this absolutely crucial question for our country that no one under

:37:50. > :37:54.the age of 55 has had an opportunity to vote on. But your

:37:54. > :37:58.party doesn't agree on that. should agree to offer people that

:37:58. > :38:03.vote to allow the people to decide, and then allow anyone within our

:38:03. > :38:08.party and outside to make their own arguments as to which side they

:38:08. > :38:12.want to be on. Afterwards we come together just as these issues have

:38:12. > :38:17.been discussed in the past. Do you trust David Cameron? The real

:38:17. > :38:21.debate we should be having is that actually under the Labour Party,

:38:21. > :38:27.Labour signed us up to the Lisbon Treaty, Labour signed up to about

:38:27. > :38:32.100,000 pages of regulations. The British Conservative Party offers

:38:32. > :38:36.the British people the opportunity to redefine that relationship, get

:38:36. > :38:39.away from that regulation. That's where we are both joined together.

:38:39. > :38:43.My concern about Labour is what happens to the Conservative Party

:38:43. > :38:49.if they offer a referendum on the EU, whether we stay part of it

:38:49. > :38:52.before we do. Thank you. That's right. There is a risk they could

:38:52. > :38:57.outflank you on this issue. Thank you very much. Would you like a

:38:57. > :39:00.taste of the krfrpbs now? -- conference now? All right then.

:39:00. > :39:05.Don't say I am not good to you! Conservative Party members were

:39:05. > :39:07.treated to a speech from the leader of the Conservatives in Scotland,

:39:07. > :39:11.Ruth Davidson. She spoke about the importance of keeping the union

:39:11. > :39:15.together, as she would. Here is a flavour of her speech. Global

:39:15. > :39:19.security, international trade, a stable currency, low interest rates,

:39:19. > :39:24.the strongest social cultural and economic bonds with consistent

:39:24. > :39:28.welfare across the nation. These are all powerful examples of the UK

:39:28. > :39:32.in action. It is no coincidence that these are the very things that

:39:32. > :39:35.separatists want to assure Scottish voters will not disappear. If

:39:35. > :39:41.things are going to change in Scotland, the SNP seems to say,

:39:41. > :39:43.everything must stay the same. But things wouldn't stay the same.

:39:43. > :39:49.Scotland's relations with every nation and institution, in

:39:49. > :39:52.particular the EU, would be reset and have to start from scratch. We

:39:52. > :39:55.know that the campaign to keep our country together will be long and

:39:55. > :40:02.sometimes tough and we don't underestimate the challenge that we

:40:02. > :40:08.face but for all Alex Salmond's bluster, this is not a done deal.

:40:08. > :40:11.Polls today show that fewer than a third of Scots support independence,

:40:11. > :40:15.just 28%. And the more people see the SNP's offering, the less

:40:15. > :40:19.appealing it becomes. That's why the Scottish Government is spending

:40:19. > :40:23.hundreds of thousands of pounds in courts trying to keep information

:40:23. > :40:27.from the Scottish people. That's why they're refusing to publish the

:40:27. > :40:31.future costs of their free electoral bribes and that's why

:40:31. > :40:35.they're twisting and turning on fundamentals like the Queen, the

:40:35. > :40:39.current and membership of NATO. Indeed, in the parliament in

:40:39. > :40:43.Edinburgh every policy, every bill, every SNP act must fit in with

:40:43. > :40:47.their overall goal of bringing the United Kingdom as we know it to an

:40:47. > :40:53.end. And that's something which affects every one of us, not just

:40:53. > :40:57.Scots. Victory for the UK and the referendum must be emphatic. It

:40:57. > :41:01.can't be by an inch, it has to be by a mile to provide the stability

:41:01. > :41:07.essential for our continued prosperity. And that's where all of

:41:07. > :41:12.you can help. Ruth Davidson there. What is the tactic from the

:41:12. > :41:22.Conservative side in terms of the issue of Scottish independence,

:41:22. > :41:23.

:41:23. > :41:27.We should put out the advantages of the union which are many. I

:41:27. > :41:30.remember John Major putting these clearly when he was Prime Minister.

:41:30. > :41:34.Shouldn't you allow the other pro- unionist parties, because of the

:41:34. > :41:37.level of unpopularity of the Tories in Scotland? No I don't think you

:41:37. > :41:42.can do that. You can't just withdraw from the political field.

:41:42. > :41:48.There was a time when we had more seats in Scotland than anybody else.

:41:48. > :41:53.But those times, I do concede, have long gone. But I think we should,

:41:53. > :41:57.the Conservative Party above all, should be arguing for the union and

:41:57. > :42:00.should be arguing, not in a strideent way but in a way that

:42:00. > :42:03.says new Scotland have got everything to gain from it as well

:42:03. > :42:08.as the rest of the United Kingdom. And briefly, just to continue the

:42:08. > :42:13.debate we were having about a referendum on membership of Europe

:42:13. > :42:17.or whatever can be agreed, the last point there by Mark Reckless that

:42:17. > :42:22.Labour could possibly outflank the Conservatives here by offering a

:42:22. > :42:26.referendum before, that's a real risk? I think, I mean, the other

:42:26. > :42:31.argument is we will be outflanked by UKIP. The Conservative Party

:42:31. > :42:34.just has to decide what they're going to do and I think that the

:42:35. > :42:42.real danger is, and you almost saw it with that discussion today, we

:42:42. > :42:47.get back to the old days and John Major's Government of two MPs on

:42:47. > :42:51.the green debating Europe. We don't want to go down that. If we should

:42:51. > :42:54.have learned anything from those years, it's that totally counter

:42:54. > :42:59.productive. It gives the impression we are a divided party. If we go to

:42:59. > :43:05.the election and went into the... Well, you are divided. To the 97

:43:05. > :43:10.election still arguing about this... How do you prevent it, do you offer

:43:10. > :43:14.that referendum and say so now? way do you it is you set out, or

:43:14. > :43:19.David Cameron sets out exactly what it is that he wants, which I think

:43:19. > :43:22.the most sensible thing to do would be to say look, we are going to

:43:22. > :43:26.negotiate, redefine the position and then we will put it to a

:43:26. > :43:29.referendum. As it happens, I am not against referendums. I was arguing

:43:29. > :43:32.for one a long time ago. But I do think that actually to have a

:43:32. > :43:39.referendum at this point with Europe in crisis would be

:43:39. > :43:42.absolutely crazy. So the big event of today is a few moments away.

:43:42. > :43:46.George Osborne's speech to the party conference is going to kick

:43:46. > :43:56.off in probably about five minutes, although they usually run late.

:43:56. > :44:00.

:44:00. > :44:06.It's been a turbulent few months For the Chancellor after his budget

:44:06. > :44:12.sparked weeks of negative headlines. Who is the man behind the red box?

:44:12. > :44:16.We have been speaking to some of his colleagues past and present.

:44:16. > :44:19.He is the Chancellor who brought in spending cuts, the Conservative MP

:44:20. > :44:22.who is close toast the Prime Minister -- close toast the Prime

:44:22. > :44:26.Minister. A family man with a wife and two children but what kind of

:44:26. > :44:31.man is George Osborne? I worked with him and he was political

:44:31. > :44:36.Secretary to William Hague before he got into parliament in 2001. He

:44:36. > :44:41.was a bright guy, a loyal guy. Occasionally brash, because we all

:44:41. > :44:45.are in our late 20s, early 30s but he was clearly a guy who was going

:44:45. > :44:48.places and everybody knew it. George, whose first stphaeupl

:44:48. > :44:52.Gideon until he changed it as a teenager, became the youngest

:44:52. > :45:02.Conservative MP ever when he was elected after Martin Bell choose to

:45:02. > :45:14.

:45:14. > :45:16.stand elsewhere. He rose up the Tory ranks quickly, becoming Shadow

:45:16. > :45:19.Chancellor in 2005. Claire Perry worked with him two years later and

:45:19. > :45:22.says he was the kinds of man who was always juggling work and family

:45:22. > :45:25.life. I used to see his diary and it would be crammed, take Liberty

:45:25. > :45:28.to school, go to Luke's play, look at the schools with him in the

:45:28. > :45:31.midst of the run on Northern Rock or whatever it was, he does try to

:45:31. > :45:33.be a good dad and father in the constraints that we all face of a

:45:33. > :45:35.busy working life. His wife, here with him at the Royal wedding, is

:45:35. > :45:38.the daughter of David Howell, a former cabinet Minister under

:45:38. > :45:41.Thatcher. Osbourne was privately schooled at St Paul's in London and

:45:41. > :45:51.went on to read modern history at Oxford where he was a member of the

:45:51. > :46:02.

:46:02. > :46:07.He was a boy growing up in London. Cheered here ahead of his Mansion

:46:07. > :46:13.House speech, George Osborne has been booed by by crowds a the

:46:13. > :46:18.Olympics and he is aware of his unpopularity according to Nick Nigh.

:46:18. > :46:21.He used to work work with him. He knows what his strengths and his

:46:21. > :46:25.weaknesses are particularly the way he can come across sometimes in

:46:25. > :46:29.public, which is one of the reasons why he limits his appearances and

:46:29. > :46:33.he adopts what people call the submarine strategy of emerging when

:46:34. > :46:36.he has something to say and says it and goes quiet.

:46:36. > :46:39.A loyal friend and second in command to the Prime Minister,

:46:39. > :46:43.theirs is a different relationship to that of their predecessors.

:46:43. > :46:51.There is a large door between Number Ten and number 11 and it

:46:51. > :47:01.used to be lock and guarded by a policeman. Now, it is open. The

:47:01. > :47:04.

:47:04. > :47:09.little Camerons are trotting in, there is an Osbourne family bud gee.

:47:09. > :47:19.For now George Osborne's plan is to get the economy growing and his

:47:19. > :47:19.

:47:19. > :47:24.This is Nick Robinson at the conference in Birmingham. Nick,

:47:24. > :47:29.let's talk about the man for a minute. He produce add Budget whose

:47:29. > :47:33.aftermath was probably the worst received in living memory. It

:47:33. > :47:37.resulted in Tory polling falling and not recovered. His personal

:47:37. > :47:41.ratings falling and not recovered. There is a lot hanging for him,

:47:41. > :47:45.never mind the Government, in this speech?

:47:45. > :47:49.Not just on this speech, Andrew. But on what happens in eight weeks

:47:49. > :47:54.time. I think the way you should judge this speech is what it tells

:47:54. > :47:58.us about what will happen in eight weeks time. On 5th December, the

:47:58. > :48:02.Chancellor stands up and delivers what most viewers would regard as a

:48:02. > :48:06.Budget. It is called the autumn statement. It is one of the two big

:48:06. > :48:11.statements that happen in the year. That statement will unveil the

:48:11. > :48:16.official forecasts, no no longer written by by politicians, about

:48:16. > :48:20.whether he is on course to meet his borrowing targets. We know now, not

:48:20. > :48:26.what they are saying, but we know clearly they will say he is off

:48:26. > :48:32.course and therefore, what he says here will provide a framework for

:48:32. > :48:38.the script of what he will have to announce on 5th December. The the

:48:38. > :48:42.headlines will be, "Sticking to the course course" and that phrase he

:48:42. > :48:47.used when the Tories were in opposition in 2009, "We are still

:48:47. > :48:50.in it together.". The problem they face Nick, as you well know, and I

:48:50. > :48:56.heard you talk about it. They may say they are sticking to the court

:48:56. > :48:59.martial, but when -- sticking to the course, but when it comes to

:48:59. > :49:03.deficit reduction, they have they have been blown off course. That's

:49:03. > :49:07.the glue of the coalition. This is meant to be the purpose of the

:49:07. > :49:13.coalition? That's right. He cannot stand up

:49:13. > :49:17.today and say, "We are on course to deal with the debt or deal with the

:49:17. > :49:20.deficit." There is a figure you will hear every Tory spokesman use

:49:20. > :49:24.at every opportunity which is the deficit is 25% lower than when they

:49:24. > :49:27.took over. Of course, what they don't say is what you have riferd

:49:28. > :49:36.to is -- referred to in this financial year, in the first four

:49:36. > :49:39.or five months, borrowing up, not down, by 20%. As a result, debt is

:49:40. > :49:44.geght bigger, not -- getting bigger, not smaller. What will he do? What

:49:44. > :49:48.you have seen the Chancellor prepare for is to say, "Yes, come

:49:48. > :49:52.5th December, the Budget-style statement, I might have to rewrite

:49:52. > :49:56.the so-called fiscal rules. The rules that say to the financial

:49:56. > :50:03.community "this is what we are going to do about borrowing. But I

:50:03. > :50:07.don't have to recite my spending cuts -- rewrite by spending cuts."

:50:07. > :50:11.Our credibility comes from a willingness of a Government to cut

:50:11. > :50:15.spending and increase taxes, to carry on cutting spending and

:50:15. > :50:17.increasing taxes for much longer than they originally planned to do,

:50:18. > :50:24.way beyond the end of this Parliament, into the next one,

:50:24. > :50:28.after the next general election and to say that's where his credibility

:50:28. > :50:33.comes from, not the fact that the economy is off course.

:50:33. > :50:43.Nick, we are going to dip in and look at what our cameras can see in

:50:43. > :50:44.

:50:44. > :50:49.the conference hall. That's the chap from the Olympics.

:50:49. > :50:55.The Government has to find �10 billion in cuts. It wants wants the

:50:55. > :51:01.rich to pay their fair share of taxes. But I am right in thinking

:51:01. > :51:07.we don't know hat welfare cuts - what the welfare cuts will amount

:51:07. > :51:11.to and I have not been able to find out if the rich are going to pay

:51:11. > :51:18.additional taxes or carry on paying what they are paying? I am told

:51:18. > :51:22.they will pay additionam additional taxes. You are at the beginning

:51:22. > :51:26.afcoalition negotiating process. We are unfamiliar with this. We think

:51:26. > :51:29.that ministers can wait for their speech and unveil what they are

:51:29. > :51:33.going to do even though they haven't managed to tell you how

:51:33. > :51:37.they are going to do it. If George Osborne wants to put taxes up on

:51:38. > :51:41.the rich, as he says he does, he has to get the scale, the type

:51:41. > :51:45.agreed with Nick Clegg. What he is doing in public is negotiating with

:51:45. > :51:52.Clegg saying, "You want a mansion tax. You are not getting one from

:51:52. > :51:57.the Conservatives. You want higher council tax bands from the rich?

:51:57. > :52:04.You are not going to get get them from the Conservatives." He wants

:52:04. > :52:09.to go and say, "I would be willing to consider this. He put up

:52:09. > :52:12.stoovrpd -- stamp duty. He has to do that. He will go to the Lib Dems

:52:12. > :52:18.and say, "Here is my starting position. �10 billion worth of

:52:18. > :52:25.welfare cuts. This is how I would do it, A, B, C, D and they would

:52:25. > :52:30.have to say, "We are not not doing this. You saw Nick Clegg say, "I

:52:30. > :52:36.would not sign up to a freeze on benefit rates." It is what the Tory

:52:36. > :52:40.wants to do, but Nick Clegg said no. But he left the door open to

:52:40. > :52:43.increasing the rate of benefits lower than the rate of inflation.

:52:43. > :52:53.You are seeing a public negotiation. One coalition partner with the

:52:53. > :52:57.other. How is Mr Osbourne's stock with the

:52:57. > :53:01.Tory faithful. Chancellors become unpopular, people like Nigel Lawson

:53:01. > :53:10.and Ken Clarke, they remain popular with their party faithful. Can the

:53:10. > :53:15.same be said of Mr Osbourne? No. For the reasons you said in in

:53:15. > :53:25.your opening session. They lost faith in a guy they knew was no

:53:25. > :53:25.

:53:25. > :53:30.great public performer, but thought had a a bit of the magic Alastair

:53:30. > :53:34.Campbell dust. When he stands up in a few seconds time, he has to say,

:53:34. > :53:37."Go back to basics. I was right in the past, I am right now.".

:53:37. > :53:40.Prime Minister joining the Chancellor in the hall. He is going

:53:40. > :53:44.to listen to his chancellor's speech. No surprise there. Lets

:53:44. > :53:54.hear the Chancellor of the Exchequer, George Osborne. Thank

:53:54. > :53:58.

:53:58. > :53:59.you for delivering the Games and making Britain proud.

:53:59. > :54:03.APPLAUSE You are joining a strong team at

:54:03. > :54:11.the Treasury. Chief secretary Danny Alexander and our Conservative

:54:11. > :54:14.colleagues, Greg Clarke, David, James, Greg Hands, and David

:54:14. > :54:24.Merritt, thank you for the support that you give me and the great job

:54:24. > :54:40.

:54:40. > :54:42.you are doing for our country. APPLAUSE

:54:42. > :54:45.Now, ladies and gentlemen, in 1972, when a Conservative Prime Minister,

:54:45. > :54:47.two years into office was faced with economic problems and over

:54:47. > :54:52.powerful unions, we buckled and we gave up. The result was higher

:54:52. > :54:56.inflation, more strikes, and the three day week. A decade later, in

:54:57. > :55:01.1981, when another Conservative Prime Minister and Conservative

:55:01. > :55:07.chancellor two years into office were faced with economic problems

:55:07. > :55:17.and powerful unions, we did not give up, but pressed on and

:55:17. > :55:24.

:55:24. > :55:27.overcame. APPLAUSE

:55:27. > :55:37.Today, in the face of the great economic challenges of our age, we

:55:37. > :55:38.

:55:38. > :55:40.here resolve, we will press on, we shall overcome.

:55:40. > :55:42.APPLAUSE We made a promise to the British

:55:42. > :55:48.people that we would repair our badly broken economy. That promise

:55:48. > :55:55.is being fulfilled. The deficit is down by a quarter. There are one

:55:55. > :56:00.million more private sector jobs. The economy is healing. That

:56:00. > :56:04.healing is taking longer than we hoped because the damage was

:56:04. > :56:14.greater than we feared. But let the message from this conference be

:56:14. > :56:33.

:56:33. > :56:35.clear, we will finish the job that we have started.

:56:35. > :56:38.APPLAUSE And there is another promise we

:56:38. > :56:41.made - on the eve of the conference, on the eve of the election, I told

:56:41. > :56:43.this conference, "We are all in this together." It was more than a

:56:44. > :56:46.slogan. It spoke of our values and of our intent. That there would be

:56:46. > :56:50.sacrifices and cuts that would be tough to make, that everyone was

:56:50. > :56:58.going to have to play their part and that in return, we would build

:56:58. > :57:03.an economy that works for all. We took the risk. Few political

:57:03. > :57:09.parties anywhere in the world are prepared to take before an election.

:57:09. > :57:17.Quite simply we told the people the truth about the hard road ahead.

:57:17. > :57:23.Now some say we paid a price for that. But at this -- but of this I

:57:23. > :57:26.am sure, our country would have been all but ungovernable if we had

:57:26. > :57:36.not been straight with the public before asking them to cast their

:57:36. > :57:46.

:57:46. > :57:49.vote. APPLAUSE

:57:49. > :57:52.So three years later my message remains the same - we're not going

:57:52. > :57:55.to get through this as a country if we set one group against another,

:57:55. > :57:57.if we divide, denounce and demonise. We need an effort from each and

:57:57. > :58:07.everyone, one nation working hard together. We are still all in this

:58:07. > :58:07.

:58:07. > :58:10.together. APPLAUSE

:58:10. > :58:16.We know what the British people mean by fair. That those who put

:58:16. > :58:22.something in should get something out. That we support those who

:58:22. > :58:29.aspire so we can help those most in need. That the cost of paying off

:58:30. > :58:39.our debts cannot possibly be borne by one section of society alone.

:58:40. > :58:48.

:58:48. > :58:49.Let's be clear, those with the most should contribute the most.

:58:49. > :58:52.APPLAUSE Each one, each one of my Budgets

:58:52. > :58:54.has increased taxes overall on the very richest. In every single year

:58:54. > :59:04.of this Parliament, the rich will pay a greater share of our nation's

:59:04. > :59:13.

:59:13. > :59:14.tax revenues than in anyone of the 13 years that Labour were in office.

:59:15. > :59:17.APPLAUSE And we've achieved that while

:59:17. > :59:27.getting rid of a cripplingingly uncompetitive 50 pence rate that

:59:27. > :59:31.

:59:31. > :59:33.raised no money and cost jobs. APPLAUSE

:59:33. > :59:35.It is a completely phoney conception of fairness that you

:59:35. > :59:38.stick with a tax rate, you know raises no money, that you know

:59:38. > :59:40.drives away jobs and investment. That you know weakens the economy

:59:40. > :59:43.just to say you have kicked the rich. The people who pay the price

:59:44. > :59:53.for that, are not the rich, but the poor looking for work and there is

:59:54. > :00:26.

:00:26. > :00:29.It's wrong that it's possible for someone to be better off on

:00:29. > :00:39.benefits than they would be in work and we are right to change that,

:00:39. > :00:43.

:00:43. > :00:47.too. APPLAUSE That's why I insisted on a cap on

:00:47. > :00:57.benefits so no family can earn more out of work than the average family

:00:57. > :01:01.

:01:01. > :01:05.earns in work. And can you believe it? Labour voted against that. All

:01:05. > :01:14.that talk about something for something and they've learned

:01:14. > :01:18.nothing about anything. Where is the fairness? Where is the

:01:18. > :01:23.fairness we ask for the shift worker, leaving home in the dark

:01:23. > :01:27.hours of the early morning, who looks up at the closed blinds of

:01:27. > :01:31.their next door neighbour sleeving off a life on benefits? When we say

:01:31. > :01:37.we are all in this together, we speak for that worker. We speak for

:01:37. > :01:47.all those who want to work hard and get on. This is the mission of the

:01:47. > :01:52.

:01:52. > :02:00.modern Conservative Party. We represent, not the factional

:02:00. > :02:04.interests of organised Labour, nor do we indulge in the lazy politics

:02:04. > :02:09.of envy. We leave it to other parties to mark people by their

:02:09. > :02:16.background, to divide, to try to reorder and pre-distribute society

:02:16. > :02:21.by the rules of their favourite sociology textbook. We modern

:02:21. > :02:27.Conservatives represent all those who aspire, all who work, save and

:02:27. > :02:32.hope, all who feel a responsibility to put in, and not just take out.

:02:32. > :02:38.Whether it's the owner of the corner shop, staying open until

:02:38. > :02:43.midnight to support their family. Or the teacher preferred to defy

:02:43. > :02:47.her union and stay late to take the after school club or the commuter

:02:47. > :02:51.who leaves home before the children are up, comes back long after

:02:51. > :02:55.they've gone to bed because they want a better life for them. Or the

:02:55. > :02:59.pensioner who saved all their life and doesn't want to spend it all as

:02:59. > :03:02.they want to pass something on to their children and grandchildren.

:03:02. > :03:06.Or the entrepreneur who doesn't cash out and pack up, but devotes

:03:06. > :03:11.their flair and energy to building the next success story. They are

:03:11. > :03:15.all part of one nation, one nation working together to get on. That is

:03:15. > :03:25.the nation we represent. These are the people I will serve as

:03:25. > :03:32.

:03:32. > :03:39.Chancellor. APPLAUSE and by the way, that's what being a

:03:39. > :03:45.party of one nation is all about. It's about a whole programme for

:03:45. > :03:49.Government. It is rissable to believe you can become a party of

:03:50. > :03:55.one nation simply by repeating the words one nation over and over

:03:55. > :03:59.again. Of course we all know why he did it. The Labour leader wants to

:03:59. > :04:09.pretend he is moving to the centre, when all can see he is moving to

:04:09. > :04:11.

:04:11. > :04:15.the left. But as it is revealed as an empty

:04:15. > :04:23.gesture, people will be more let down by the reality than they were

:04:23. > :04:27.attracted by the pretense. You can imagine Benjamin Disraeli's

:04:27. > :04:37.disappointment, moments after the joy of being told there really is

:04:37. > :04:42.

:04:42. > :04:47.reincarnation, he discovers he's come back as Ed Miliband. To the

:04:47. > :04:53.people of Britain I say this, whoever you are, wherever you come

:04:53. > :04:58.from, if you're working for a better future, we are on your side.

:04:58. > :05:03.Ladies and gentlemen, I see this this Conservative Prime Minister,

:05:03. > :05:13.David Cameron, close-up. He is an outstanding Prime Minister of

:05:13. > :05:20.

:05:20. > :05:27.judgment and integrity. APPLAUSE. But more than that, he is leading a

:05:27. > :05:33.Government of change, of profound long-lasting change. Beneath the

:05:33. > :05:38.sound and fury of the daily debate, a silent revolution is taking place.

:05:38. > :05:44.Some of the biggest issues in politics, so big people thought

:05:44. > :05:49.them too controversial to fix, we have been prepared to tackle. A

:05:49. > :05:57.state that had become too expensive to pay for. Public sector pensions

:05:57. > :06:03.we couldn't afford. People earning low incomes but still paying income

:06:03. > :06:09.tax. Businesses fleeing Britain because our taxes were too high. In

:06:09. > :06:14.welfare, policing, and education, services that were crying out for

:06:14. > :06:22.reform. Government that had become too centralised, the constant drip-

:06:22. > :06:27.drip of powers to Europe. When you are tackling all of these big

:06:27. > :06:31.issues, of course the mid-term politics are difficult. But I tell

:06:31. > :06:36.you this, I'd rather have these difficulties because we are

:06:36. > :06:46.tackling these big challenges, than wake up like Tony Blair did after a

:06:46. > :06:54.

:06:54. > :06:58.decade in power and discover he Let us all, all of us, be proud

:06:58. > :07:04.that we're contributing to the most radical and reforming period of

:07:04. > :07:14.Government this country has seen for a generation. Yes, we've done

:07:14. > :07:16.

:07:16. > :07:22.it in coalition. But we could have done none of it without a coalition.

:07:22. > :07:27.Here's a fact about our constitution that we all know, what

:07:27. > :07:32.David, you might call a magnet factor, you can't win the votes you

:07:32. > :07:38.need in parliament for each and everyone of these changes without a

:07:38. > :07:42.majority. And the Conservative Party at its best has always known

:07:42. > :07:52.its responsibility. We would rather confront the choices and dilemmas

:07:52. > :08:01.of Government, than bask in the blissful irrelevance of opposition.

:08:01. > :08:06.APPLAUSE Now, we face more hard choices this

:08:06. > :08:11.autumn. The truth is that the damage done by the debts and the

:08:11. > :08:16.banking crisis was worse than we feared. The rise in the world oil

:08:16. > :08:20.price has been larger than anyone forecast. Sadly, the predictions

:08:20. > :08:26.that you made, that I made, that almost everyone here made, about

:08:26. > :08:33.the euro, turned out to be all too true. This makes the job more

:08:33. > :08:39.difficult, but it doesn't make it any less urgent. Yes, we've cut the

:08:39. > :08:43.budget deficit by a quarter. But it tells you something about just how

:08:43. > :08:50.big it was that the deficit is still higher today than when a

:08:50. > :08:56.British Government went begging to the IMF in the 1970s. Now this

:08:56. > :09:00.Wednesday I am also going to a meeting of the IMF. Don't worry,

:09:00. > :09:05.because of the resolve of the British people, I go representing a

:09:05. > :09:12.country that is seen as part of the solution, not part of the problem.

:09:12. > :09:18.That is only because of the credibility our plans have earned.

:09:18. > :09:25.Now I know our plans have been criticised, but the critics don't

:09:25. > :09:31.seem to agree. Some say we're going too fast. We should be spending and

:09:31. > :09:37.borrowing even more. They're curious -- their cure kwrougs

:09:37. > :09:43.suggestion Kuerten kwrougs suggest -- in good times and bad, in boom

:09:43. > :09:46.and bust, their answer is always to spin and borrow more. And they

:09:46. > :09:51.think -- spend and borrow more. They think there is such a thing as

:09:51. > :09:55.a free lunch. They They think that extra borrowing could pay for

:09:55. > :10:00.spending or temporary tax cuts in an attempt to put money in the

:10:00. > :10:04.pockets of consumers. But the extra borrowing would come at the cost of

:10:04. > :10:09.higher interest rates and everyone would know that there will be

:10:09. > :10:13.higher taxes to pay for it coming down the track. The higher interest

:10:13. > :10:18.rates would pick the very pockets of the working people you are

:10:18. > :10:25.trying to help. And the fear of extra taxes would undermine their

:10:25. > :10:28.confidence. In other words, our critics would gamble everything.

:10:28. > :10:33.Our credibility, our financial stability, our low interest rates,

:10:33. > :10:37.the cost of our debt. They would risk everything on the dubious idea

:10:37. > :10:42.that a few billion more of spending would dramatically improve the

:10:42. > :10:52.fortunes of the trillion and a half pound British economy. I will not

:10:52. > :10:59.

:10:59. > :11:03.take that risk with the British economy. In that 70-minute speech

:11:03. > :11:10.last week to the Labour conference, do you know how many times Ed

:11:10. > :11:16.Miliband mentioned the deficit? Not once. Not once. No mention of

:11:16. > :11:21.perhaps the most acute problem facing the country. People

:11:21. > :11:25.marvelled at Ed Miliband's feat of memory. And so did I. He spoke for

:11:25. > :11:35.over an hour about the problems of Britain and forgot to mention that

:11:35. > :11:37.

:11:37. > :11:42.we had a Labour Government running He told us about his life story,

:11:42. > :11:46.but forgot to mention he spend a third of his life working for

:11:46. > :11:50.Gordon Brown. Maybe someone hit him over the head with a mobile phone?

:11:50. > :11:55.What was the biggest memory laps of all? He forgot to say the three

:11:55. > :12:05.things that the British people want to hear from the Labour Party -

:12:05. > :12:07.

:12:07. > :12:11.we're sorry, we spent too much, we don't do it again. APPLAUSE

:12:11. > :12:21.Now he may be trying to forget, we're never going to let him.

:12:21. > :12:26.

:12:26. > :12:31.Labour must now be trusted to run the country's public finances again.

:12:31. > :12:36.Now as well as those critics saying we're cutting too fast, there are

:12:36. > :12:41.those who say we're cutting too slow. Because some of those who say

:12:41. > :12:46.this are our friends on the debt issue, I want to address the point

:12:46. > :12:49.very carefully. I am the first to say we should have lower taxes and

:12:50. > :12:55.a smaller Government. And I am the Chancellor who is cutting the size

:12:55. > :13:01.of Government faster than anyone in modern times. We are reducing the

:13:01. > :13:07.size of Government from almost 50% of our national income, to just 40%

:13:07. > :13:12.in just five years. I just don't think it's realistic to cut a great

:13:12. > :13:17.deal faster than that. And as we reduce employment in the public

:13:17. > :13:22.sector, we have to do it at a pace that allows the private sector to

:13:22. > :13:27.fill the gap. We promised the British people we would protect

:13:27. > :13:33.decent public services as we dealt with the deficit and so we will. We

:13:33. > :13:36.have never argued that you stop what economists call the automatic

:13:36. > :13:42.stableisers from operating. The lower tax receipts and extra

:13:42. > :13:46.Government payments that follow, if, for example, the global economy

:13:46. > :13:51.turns down. Our public spending plans were designed to give us

:13:51. > :13:55.flexibility and credibility. The flexibility to respond to the

:13:55. > :14:03.economic conditions in the world around us. The credibility that

:14:03. > :14:08.each day earns for us record low interest rates in the world bond

:14:08. > :14:14.markets. Our detailed tax and spending plans have brought us

:14:14. > :14:20.stability, but they only cover the next two years. And we must now

:14:20. > :14:27.take some very serious decisions about what we do after that. Let me

:14:27. > :14:34.tell you about my approach to these decisions. Our published plans

:14:34. > :14:39.already require us to find �16 billion of further savings. As I

:14:39. > :14:44.have said, the broadest shoulders will continue to bear the greatest

:14:44. > :14:49.burden. But I am not prepared to contemplate things that make no

:14:49. > :14:54.economic sense, and destroy jobs. So we won't have some kind of

:14:54. > :14:58.temporary wealth tax, even Dennis Healey thought that was a bad idea.

:14:58. > :15:04.Our future lies as a country where wealth creation is not something to

:15:04. > :15:14.be penalised, but encouraged. And nor am I going to introduce a new

:15:14. > :15:19.

:15:19. > :15:23.tax on people's homes. APPLAUSE. would be sold as a mansion tax but

:15:23. > :15:26.once the tax inspector has his foot in the door you would soon find

:15:26. > :15:31.most of the homes in the country labelled a mansion, homes people

:15:31. > :15:35.have worked hard to afford and already paid taxes on, it's not a

:15:35. > :15:45.mansion tax, it's a homes tax and this party of home ownership will

:15:45. > :15:57.

:15:57. > :16:01.When it comes to the richest, the first place I will look is those

:16:01. > :16:06.who are not paying the taxes we expect them to pay today. We will

:16:06. > :16:11.continue our ruthless pursuit of tax evasion. We will make

:16:11. > :16:16.aggressive tax avoidance more and more uncomfortable. This is not

:16:16. > :16:21.idle rhetoric, thanks to our action, we are collecting �4 billion more

:16:21. > :16:26.every year from those who avoid or evade tax and we will take new

:16:27. > :16:36.measures to collect even more. The Conservatives are the party of low

:16:37. > :16:48.

:16:48. > :16:50.taxes for the many, not the party of no taxes for the few.

:16:50. > :16:52.APPLAUSE If there are other ways to increase

:16:52. > :16:54.revenue from the very top without damaging the enterprise economy, we

:16:54. > :16:57.will look for them. But our country's problem is not that

:16:57. > :17:07.working people pay too little tax, it is that Government spends too

:17:07. > :17:10.

:17:10. > :17:13.much of their money. APPLAUSE

:17:13. > :17:23.And I'm determined that once again the great bulk of savings must come

:17:23. > :17:25.

:17:25. > :17:27.from cutting Government spending, not increasing taxes.

:17:27. > :17:30.APPLAUSE Now I have said before that 80% of

:17:30. > :17:33.our total effort to cut the deficit must come from reduced spending and

:17:33. > :17:35.that should remain the case. As we have shown in the last two years,

:17:35. > :17:40.it is possible to do that while improving our public services.

:17:40. > :17:45.Crime has fallen. Hospital waiting lists are down. School standards

:17:45. > :17:49.are higher. In Government, this party, this party is achieving

:17:49. > :17:52.something invaluable. We're destroying the left-wing myth that

:17:52. > :17:58.the success of a public service is measured only by how many pounds we

:17:58. > :18:02.spend on t not by whether it heals our sick our he had kates our our

:18:02. > :18:07.children or makes our streets safe. This is because we are doing it

:18:07. > :18:13.carefully and doing it right. And if we want to go on doing that and

:18:13. > :18:19.limit the cuts to departments, then we have to find greater savings in

:18:19. > :18:25.the welfare bill. �10 billion of welfare savings by the first full

:18:25. > :18:29.year of the next Parliament. Iain Duncan Smith and I are committed to

:18:29. > :18:34.finding these savings while delivering the most radical reforms

:18:34. > :18:37.of our welfare system for a generation with a Universal Credit

:18:37. > :18:43.so that work always pays because it is not just about the money. It

:18:43. > :18:47.comes back to fairness and to enterprise. Four how can we justify

:18:47. > :18:52.the incomes of those out of work rising faster than the incomes of

:18:52. > :18:56.those in work? How can we justify giving flats to young people who

:18:56. > :19:00.have never worked when working people twice their age are still

:19:00. > :19:10.living with their parents because they can't afford their first home?

:19:10. > :19:22.

:19:22. > :19:25.How can we justify... APPLAUSE

:19:25. > :19:27.How can we justify a system where people in work have to consider the

:19:27. > :19:37.full financial costs of having another child while those out of

:19:37. > :19:46.

:19:46. > :19:49.work don't? APPLAUSE

:19:49. > :19:51.And here is the broader point - how could a country, that wants to

:19:51. > :19:53.compete in the world economy possibly explain that it is cutting

:19:53. > :19:56.budgets on things like schools and science because it couldn't summon

:19:56. > :19:58.the political will to control welfare? For in this country, we

:19:58. > :20:01.face something even greater than recovery from recession and the

:20:01. > :20:05.problems of the past. We face the shock of the future. Something my

:20:05. > :20:15.great friend William Hague talked to us about yesterday and what a

:20:15. > :20:26.

:20:26. > :20:29.brilliant Foreign Secretary he is. APPLAUSE

:20:29. > :20:31.William told us yesterday, I will tell you today, the economic crisis

:20:31. > :20:33.has accelerated a change that was already happening in our world.

:20:33. > :20:41.Prosperity and the power it brings is shifting to new corners of the

:20:41. > :20:44.globe to Asia, and the Americas and even now Africa. I'm proud of our

:20:44. > :20:48.commitment to international development, but the truth is that

:20:48. > :20:51.free enterprise is lifting hundreds of millions of people out of

:20:51. > :20:57.poverty, more quickly than all the Government aid programmes of the

:20:57. > :21:03.world put together. That's good news for them. And good news for us

:21:03. > :21:10.too. It creates vast new markets for British exports, but only if we

:21:10. > :21:15.rise to the challenge. Western democracies like ours is is being

:21:15. > :21:18.without without worked, kout competed, outsmarted by these new

:21:18. > :21:26.economies and the economy for countries like Britain is this -

:21:26. > :21:31.are we going to sink or swim? And the truth is some western western

:21:31. > :21:33.countries won't keep up. They won't make the the changes needed to

:21:33. > :21:37.welfare, education and tax. They will fall further and further

:21:37. > :21:47.behind. They will become poorer and poorer. I am determined that will

:21:47. > :21:53.

:21:53. > :21:55.not be the Britain I leave to my children or you leave to yours.

:21:55. > :22:00.APPLAUSE And it need not be. If we go on

:22:00. > :22:05.making the fundamental, deep rooted changes needed so that our country

:22:05. > :22:11.can grow and compete and prosper. Delivering the further cuts to

:22:11. > :22:17.business tax that we have promised. Supporting Michael Fallon's

:22:17. > :22:21.deregulation plans, seeing through Michael Gove's school reforms and

:22:21. > :22:31.by the way those school reforms are the single most important long-term

:22:31. > :22:36.

:22:36. > :22:37.economic investment this country can make.

:22:37. > :22:40.APPLAUSE Our entire economic policy is an

:22:40. > :22:45.enterprise policy. We will be the Government for people who aspire

:22:45. > :22:49.like the people who start a new business and who work in that

:22:49. > :22:55.business and want to own shares in it. Today, we are setting out

:22:55. > :23:05.proposals for a radical change to employment law. I want to thank

:23:05. > :23:08.

:23:08. > :23:10.Adrian Bee croft for the work he has done in this area.

:23:10. > :23:12.APPLAUSE Now this idea is particularly

:23:12. > :23:14.suited to new businesses starting up and small and medium sized firms.

:23:15. > :23:20.It is a voluntary, three-way deal. You the company, give your

:23:20. > :23:25.employees shares in the business. You the employee, replace your old

:23:25. > :23:28.rights of unfair dismissal and dedone dancy with new rights of

:23:29. > :23:33.ownership. And what will the Government do? We will charge no

:23:33. > :23:43.capital gains tax at all on the profits you make on your shares.

:23:43. > :23:48.

:23:48. > :23:49.Zero percent, capital gains tax for these new employee owners.

:23:49. > :23:52.APPLAUSE Get shares and become owners of the

:23:52. > :24:02.company you work for. Owners, workers and the taxmen all in it

:24:02. > :24:10.

:24:10. > :24:12.together, workers of the world unite.

:24:12. > :24:15.APPLAUSE M I am a low tax, small Government

:24:15. > :24:16.xiv, but I never thought the State is without a role to play in the

:24:16. > :24:21.economy. We're Conservatives, not anarchists.

:24:21. > :24:24.We have never allowed uncontrolled capitalism free reign. It was these

:24:24. > :24:28.Labour politicians, not Conservatives, who let the banks

:24:28. > :24:33.run rampage because they didn't understand that to work for

:24:33. > :24:39.everyone, markets need rules. I am the Chancellor in a Government that

:24:39. > :24:44.has done more to reform finance and banking than any before it,

:24:44. > :24:47.commissioning and implementing the Vickers Report, ring-fencing the

:24:47. > :24:52.high street banks when Labour wouldn't. Putting the Bank of

:24:52. > :24:58.England back in charge and working with them to fund new lending. New

:24:58. > :25:02.creating a British business bank. And when we find those Backers

:25:02. > :25:05.involved in scandals like LIBOR, we are not going to give the money

:25:05. > :25:09.back to the banks as Labour did, we are giving the money instead to

:25:09. > :25:19.those who represent the very best values in our country, our veterans

:25:19. > :25:29.

:25:29. > :25:31.and our injured soldiers. APPLAUSE

:25:31. > :25:33.Ladies and gentlemen, we're reforming banking so it serves our

:25:34. > :25:37.economy and supports families and businesses. That is part of our

:25:37. > :25:41.interprice strategy -- enterprise strategy. People ask how are we

:25:41. > :25:46.going to earn our way in the world? This is how -- with an enterprise

:25:46. > :25:51.strategy that safeguards low interest rates. With an enterprise

:25:51. > :25:55.strategy that reduces taxes on entrepreneurs and the low paid.

:25:55. > :26:00.With an enper price strategy that creates confidence that this

:26:00. > :26:02.country has a Government Government can pay its bills. We will pay our

:26:02. > :26:05.way through the skills and the talents of the British people.

:26:05. > :26:10.Ensuring our scientists, our engineers and our apprentices are

:26:10. > :26:14.the best in the the world. We will be activists, building

:26:14. > :26:20.infrastructure, roads and power plants and broadband, we will be

:26:20. > :26:24.activists for high-speed rail and air capacity, and cut through the

:26:24. > :26:29.delays and red tape, and where was there more red tape than in our

:26:29. > :26:39.planning laws and enterprise enterprise strategy, means

:26:39. > :26:41.

:26:41. > :26:47.investing in renewable energy. We are today consulting on a generous

:26:48. > :26:52.new tax regime for shale gas so Britain is not left behind as gas

:26:52. > :26:55.prices tumble on the other side of the Atlantic.

:26:55. > :27:01.Our enterprise strategy is accepting Britain faces competition

:27:01. > :27:04.from all over the world and backing what we're good at. When I hear

:27:04. > :27:08.about Britain's global lead in aerospace, I want to extend it.

:27:08. > :27:14.When I see Britain's genius in animation, media and computing, I

:27:14. > :27:19.want to promote it. When I read of the new frontiers in synthetic

:27:19. > :27:22.biology and reagaintive medicine, I want us to pioneer them. Together,

:27:22. > :27:26.with some of our leading businesses and universities, we today announce

:27:26. > :27:31.�1 billion of new science investment in the areas where we

:27:31. > :27:41.lead the world. That is a modern industrial policy and I am its

:27:41. > :27:48.

:27:48. > :27:51.champion. Let's get on with it. APPLAUSE

:27:51. > :27:57.And throughout, let's hold in mind who we do it for. That corner shop

:27:57. > :28:01.owner, that teacher, that commuter, that pensioner, that entrepreneur,

:28:01. > :28:08.that shift worker leaving their home in the early morning. They

:28:08. > :28:13.strive for a better life. We strive to help them. Ladies and gentlemen,

:28:13. > :28:19.I have shared with you today the challenges and the decisions I have

:28:19. > :28:25.to confront in the coming months. I asked for your support and your

:28:25. > :28:31.trust and your resolve as we go through these challenges together.

:28:31. > :28:37.We knew two years ago that the task we were taking on was a great one.

:28:37. > :28:42.It isn't too much to say that the future prosperity of our country,

:28:42. > :28:48.the future of a free enterprise system under law, even the

:28:48. > :28:52.stability of Europe is in question in a way it is not -- it has not

:28:52. > :28:59.been before in my lifetime. I cannot pledge to you simple answers

:28:59. > :29:03.or a quick solution. This year has shown we are a country confronted

:29:03. > :29:09.on all sides by great difficulties, but this year has also shown we

:29:09. > :29:14.live in a country of courage and creativity. A country that can can

:29:14. > :29:20.do incredible things and succeed when we pull together. We never

:29:20. > :29:24.forget that to be the Government of such a country is an honour and

:29:24. > :29:28.when we make the hard decisions, we do not make them alone because we

:29:28. > :29:38.have the British people at our side and together we can deliver.

:29:38. > :29:39.

:29:39. > :29:43.Thank you very much. The Chancellor of the Exchequer

:29:43. > :29:47.finishes his annual address at the Conservative Party Conference. He

:29:48. > :29:54.said that the damage they inherited from the economy was much worse

:29:54. > :29:59.than they feared. This was why the austerity is going to last until

:29:59. > :30:03.2018. He blamed oil prices, the size of the deficit and the

:30:03. > :30:10.continued troubles in the eurozone. He claimed the deficit was higher

:30:10. > :30:16.now than when the IMF were brought in in 1976. No change, no U-turn

:30:16. > :30:21.kind of speech here. He did announce however a new change in a

:30:21. > :30:26.labour law which is that if you give up some of your employment

:30:26. > :30:32.rights then you will get shares in the company that you are with and

:30:32. > :30:40.you will get the shares with the capital gains tax free when you

:30:40. > :30:43.come to sell them. The shares maybe worth nothing, but there has been

:30:43. > :30:49.lots of proposals like this. It is the first time this has been linked

:30:49. > :30:53.to a change in employment law, that's probably the new thing there.

:30:53. > :30:59.A muted applause for Mr Osbourne, he didn't bring them on fire there

:30:59. > :31:09.and he is a man that has to establish his reputation with the

:31:09. > :31:16.

:31:16. > :31:20.Vicky Young is saying the - - Lib Dems. There will be a joint

:31:20. > :31:25.spending plan agreed to this parliament. Mr Osbourne is talking

:31:25. > :31:30.about making cuts of �10 billion in welfare, ten is part of the 16,

:31:30. > :31:34.over two years. It's likely this will mean finding �6 billion in

:31:34. > :31:38.welfare cuts in the first year of 2016.

:31:38. > :31:45.The Lib Dems are still insisting that they will consider the welfare

:31:45. > :31:48.cuts only if the Conservatives agree to the the... That's an

:31:48. > :31:52.announcement through the BBC. We heard the Chancellor's speech. We

:31:52. > :31:57.are joined now by the shadow Treasury Minister, Chris Leslie and

:31:57. > :32:01.Norman Fowler, is still here. It's your party, what did you make of it,

:32:01. > :32:06.the speech? I thought it was a good speech. I mean, the fact is that

:32:06. > :32:11.what he was saying is we are going to press on. It's quite a difficult

:32:11. > :32:15.speech in that sense. You were right in your analysis that what he

:32:15. > :32:18.was saying was we are going to continue with the policies and

:32:18. > :32:23.therefore, it is a difficult speech as you well know in conference

:32:23. > :32:30.terms to make. I thought the very interesting phrase he used was that

:32:30. > :32:34.the economy is healing. I hadn't heard him use that phrase. It's the

:32:34. > :32:37.official buzzword. Mr Hammond used it in an interview for a Sunday

:32:37. > :32:41.paper. I think even Mr Osbourne used it in another interview.

:32:41. > :32:45.Healing is the new green shoots. Well, it's the new green shoots.

:32:45. > :32:51.It's a better phrase, incidentally than the green shoots. You can tell

:32:51. > :32:55.that to your friend Norman Lamont. I will! I think the issues, you

:32:55. > :33:00.know, we have already gone into the major issue about welfare, it's

:33:00. > :33:05.going to be difficult. And of course the fact of the matter is

:33:05. > :33:09.that we did inherit the most God awful mess from the last Labour

:33:09. > :33:13.Government. I think that is now well-established and I think what

:33:13. > :33:19.Labour have to do is saying, not so much having a bash here and bash

:33:19. > :33:22.there, but what actually would you cancel of the things that apart

:33:23. > :33:29.from 50p tax? We are going to go to Birmingham in a second to hear from

:33:29. > :33:32.our political editor, Nick Robinson. Before I do, Chris Leslie, there is

:33:32. > :33:35.a certain irony about the Chancellor talking about more cuts

:33:35. > :33:39.to come in later years, when we know the deficit in this financial

:33:39. > :33:44.year is rising, not falling. But if I could park that for a minute,

:33:44. > :33:48.because we have talked about it, we are agreed on that... I may need to

:33:48. > :33:55.come back to it. I wouldn't stop you. But will you now have to get

:33:55. > :34:01.involved in this argument over what cuts are going to be made in 2015-

:34:01. > :34:04.16 and 2016-17? Can you avoid saying anything about that. We are

:34:04. > :34:08.two and a half years away from that general election and the beginning

:34:08. > :34:12.of that spending period. The cuts have to be decided or spending

:34:12. > :34:17.plans before. The key thing is this, the reason we have benefits bills

:34:17. > :34:21.soaring so much is because we've got growth totally flat. We are in

:34:22. > :34:26.recession. To hear the Chancellor, you would think that all was rosy

:34:26. > :34:30.in the garden. He didn't mention unemployment, he didn't really

:34:30. > :34:36.confront that issue, as you have parked about borrowing actually

:34:36. > :34:42.quite significantly high, 22% higher this year. Surely what our

:34:42. > :34:48.task is now before 2015 is to focus on job creation. We can start to

:34:48. > :34:53.range in some of that welfare cost, start to boast revenues for the

:34:53. > :34:56.Exchequer. At no point did we hear anything new about job creation and

:34:56. > :34:59.growth. That's the frustrating thing that makes me and others

:34:59. > :35:04.angry outside. They look at this Chancellor and see a man in denial.

:35:04. > :35:07.This is a Chancellor who thinks we can go steady as she goes, no

:35:07. > :35:10.particular changes and we have a crisis of youth unemployment, a

:35:10. > :35:14.crisis of long-term unemployment and it's hitting us all in the

:35:14. > :35:19.pocket because of the welfare bill is soaring, directly as a result of

:35:19. > :35:23.the recession he's caused. Pause your thoughts. We are going to go

:35:23. > :35:29.back to Birmingham. Nick, it's hard to tell from here, you were there,

:35:29. > :35:34.for a man who has to restore his credibility, even popularity with

:35:34. > :35:38.his own party, never mind the wider country, it didn't seem much of a

:35:39. > :35:43.great ovation at the end. Did we get that wrong? No, there wasn't

:35:43. > :35:46.much of an ovation. He choose to walk straight off the stage,

:35:46. > :35:51.presumably knowing that he wasn't likely to get one. He did one

:35:51. > :35:55.simple thing, though, he did something to appeal to an older

:35:55. > :36:00.Conservative audience, most of them in there are, who remember the

:36:00. > :36:06.1980s, when Margaret Thatcher in 1981, two years into Government

:36:06. > :36:10.said, the lady's not for turning. He said, we will press on, we shall

:36:10. > :36:14.overcome. His message in a sense can be boiled down to that. I know

:36:14. > :36:18.it's not going to plan, I know in effect that in a few weeks' time in

:36:18. > :36:22.the autumn statement I may have to stand up and say borrowing is

:36:22. > :36:26.growing, the deficit is growing, debt is growing, but my message is,

:36:26. > :36:31.we plough on. We stick with the course because it is, in his view,

:36:31. > :36:36.the right course. By that autumn statement, though we should start

:36:36. > :36:41.calling it the winter statement, it is on December 5th, he has a

:36:41. > :36:45.strange idea of what autumn is. If we then have the third quarter

:36:45. > :36:51.growth figures, the growth, if there is any in the economy, for

:36:51. > :36:55.July, jug, September. -- July, August, September. If the figures

:36:55. > :37:00.disappoint that will be given what he said today that's a terrible

:37:00. > :37:03.backdrop to the winter statement? It is absolutely a terrible

:37:04. > :37:07.backdrop if it happens. Of course you heard Ministers talk rather

:37:07. > :37:12.carefully about how the economy is healing. They want to avoid using

:37:12. > :37:15.that language again that dates back a while, Norman Lamont in the 1990s

:37:15. > :37:18.talked about green shoots of recovery, got very badly damaged by

:37:18. > :37:22.claiming that too early. They want to avoid that so they're talking

:37:22. > :37:26.about the economy healing. Behind the scenes Minister after Minister

:37:26. > :37:29.says to me we think these growth figures aren't quite right. We

:37:29. > :37:33.think the employment figures look better than the growth figures. We

:37:33. > :37:38.think they're measuring something real, people in jobs. Whereas the

:37:38. > :37:40.so-called GDP figures are a kind of economist's estimate of what's

:37:41. > :37:45.happening in the economy. I don't think the figure will lead them to

:37:45. > :37:48.change their mind tpwu would make the political and economic backdrop

:37:48. > :37:52.harder. The crucial thing they're waiting for is not that figure, but

:37:53. > :37:56.the forecast of the Office of Budget Responsibility. That new

:37:56. > :38:02.office is tasked with a job of saying whether the Chancellor is or

:38:02. > :38:05.is not on course to meet his own fiscal targets. The targets for

:38:05. > :38:08.Government borrowing, in other words F they say he is off course

:38:08. > :38:13.and remember they don't simply say off or on course, they tend to give

:38:13. > :38:16.a percentage. He is this many percent likely to meet this or not

:38:16. > :38:21.to meet it. That will be the toughest thing for him to do. In a

:38:21. > :38:27.sense, he's told us a huge amount actually about the future. He's

:38:27. > :38:31.given us, not specific details but he's said come December 5th, I

:38:31. > :38:35.carry on as I have done up until now, wanting to cut spending by

:38:35. > :38:39.four times as much as raising taxes, but still willing to raise taxes a

:38:39. > :38:42.bit more, willing to cut welfare much more than cutting other

:38:42. > :38:46.spending, because he thinks it's economically right and politically

:38:46. > :38:49.popular. That he will do that on December 5th statement, and in a

:38:49. > :38:54.spending round that will probably follow in the following year in

:38:54. > :38:58.order to be announced as the spending cuts for 2015. So in a way

:38:58. > :39:06.it may feel like you have learned nothing, you have in one sense

:39:06. > :39:12.learned a huge amount. Thank you very much.

:39:12. > :39:15.We will be bringing you here on BBC2 live full coverage of this

:39:15. > :39:22.increasingly important statement, autumn statement, winter statement,

:39:22. > :39:28.I am going to rechristen it, on December 5th. Norman, a political

:39:29. > :39:32.question, how much misery can a Government continue to pile on a

:39:32. > :39:37.nation nation, as an election gets closer, before it's too late for

:39:37. > :39:40.people to think things are getting better? I think it's all down to

:39:40. > :39:43.public perception. I don't think there's any particular time that

:39:43. > :39:47.you can actually put on that. Obviously, by the time of the next

:39:47. > :39:52.election, as we come into the next election, I don't think the opinion

:39:52. > :39:59.polls matter quite so much. But by the time, 12 months, coming into

:39:59. > :40:04.the next election, I think the country have got to see that things

:40:04. > :40:07.are improving. I think before one just throws out Norman Lamont's

:40:07. > :40:15.statement about green shoots, one should remember that there were

:40:15. > :40:20.green shoots. That was the truth. You then went on to lose by the

:40:20. > :40:24.biggest defeat I think since Lord Liverpool. Even you weren't around

:40:24. > :40:28.that time. Not quite. It had nothing to do with that. The fact

:40:28. > :40:33.was, as is recognised, we actually at the end, this is the tragedy of

:40:33. > :40:38.that election, we had the strongest economy we had had for years, with

:40:38. > :40:42.Ken Clarke taking over from Lamont. OK, let's stick with now!

:40:42. > :40:47.The political difficulty I would suggest for Labour it seems from

:40:47. > :40:50.the polls that your leader is not robust -- the lead is not robust

:40:50. > :40:54.tphouf survive an outbreak of growth in the economy if it happens.

:40:55. > :40:59.In other words, a sense that things were getting better. I don't know

:40:59. > :41:03.about that. I think the public want to see a Government that's united

:41:03. > :41:07.and has a plan for actually moving the country forward, not just

:41:07. > :41:10.questions about reducing the deficit and dealing with debt but

:41:10. > :41:14.also where are we going as a society? This is the one nation

:41:14. > :41:19.Britain that Ed Miliband was talking about. But you can't have a

:41:19. > :41:23.Chancellor who is essentially a recession denier, who is basically

:41:23. > :41:27.saying no, well, our plans will continue to change as they set them

:41:27. > :41:30.out in 2010. Somebody who promised to balance the books, remember by

:41:30. > :41:35.2015 and now he can't do that because of all these soaring

:41:35. > :41:39.welfare bills that he's provoked. He is refusing to change course.

:41:39. > :41:43.It's so overwhelmingly necessary to stand up for those aspiring people,

:41:43. > :41:47.the Chancellor talked about people wanting to get on. What about all

:41:47. > :41:50.those people whose careers have been stunted? The 33,000 businesses

:41:50. > :41:53.that have gone bust since the general election? All those one

:41:53. > :41:58.million young unemployed, it's the youngest people actually in society

:41:58. > :42:02.who are really hurting most of all. That's why we have got to get a

:42:02. > :42:07.change of Government because we need an economic plan that can get

:42:07. > :42:11.us on the right... I apologise, I have to go to Birmingham. Thank you.

:42:11. > :42:18.You may want to stay and listen to this, we are going to talk to

:42:18. > :42:22.almost your opposite number. The economic Minister to the Treasury,

:42:22. > :42:28.Sajid Javid. Good afternoon to you. Can I ask you this, the Prime

:42:28. > :42:35.Minister spoke yesterday on the BBC saying that he was rebalancing the

:42:35. > :42:40.economy away from debt, not the deficit, rebalancing the economy

:42:40. > :42:46.away from debt. In that rebalancing, can you tell us by how much he's

:42:46. > :42:49.cut our debt? Well, you will know the first step to dealing with the

:42:49. > :42:52.national debt under the previous Government tripled, is to deal with

:42:52. > :42:55.the deficit. The deficit is the amount that we borrow each year

:42:55. > :42:59.that's added to the debt. So the important thing is that the deficit

:42:59. > :43:04.is falling, and the good news is that in the last two years the

:43:04. > :43:08.deficit is down by a quarter. have talked about how it's rising

:43:08. > :43:15.this year so far. I don't want to go that way. I want to stake with

:43:16. > :43:25.debt. -- I want want to stick with debt. The figures is you inherited

:43:25. > :43:28.a national debt of about 650 billion pounds. By 2015 it will be

:43:28. > :43:33.1.4 trillion. In other words, it will double under your watch. Could

:43:34. > :43:38.you explain to viewers how that's rebalancing the economy away from

:43:38. > :43:43.debt? You are doubling it. Well, actually first of all we inherited

:43:43. > :43:47.a national debt of about 920 billion, about 100 billion higher

:43:47. > :43:51.than the number you gave. When the previous Government came to power

:43:51. > :43:54.in 97 it was about 300 billion. First of all, it tripled and that's

:43:54. > :43:57.important because that shows the size of the mess that we have to

:43:57. > :44:01.deal with. Under this Government clearly the debt will continue to

:44:01. > :44:06.rise until the deficit is brought under control. I think as the

:44:06. > :44:11.Chancellor just said in his speech, that you can't turn around a

:44:11. > :44:14.deficit which is equal to 10% of GDP, the largest of any

:44:14. > :44:17.industrialised country overnight. It has to be a gradual process.

:44:17. > :44:21.That's what we have been doing. That's why we have cut it by a

:44:21. > :44:25.quarter. The Chancellor is right that we have got to continue with

:44:25. > :44:28.that strategy because the first step to lowering debt is to lower

:44:28. > :44:32.the deficit and that's what we need to do to build business confidence.

:44:33. > :44:37.You are quite right, the eventual debt was around 900 billion, it was

:44:37. > :44:40.about 650 billion before the efforts that were taken to stop the

:44:40. > :44:46.banking system collapsing and we went into recession. I take that.

:44:46. > :44:52.My point to you is that it's continuing to rise to reach 1.4

:44:52. > :44:56.trillion. I don't understand how that's a rebalancing this side of

:44:56. > :45:02.2015 but I will be happy to listen to an explanation. Could we now

:45:02. > :45:12.both admit because we know it to be true, that you will fail to hit

:45:12. > :45:18.

:45:18. > :45:21.your target of reducing debt by We have a clear target. Because it

:45:21. > :45:24.is independent, unlike previous governments where epegsly under

:45:24. > :45:29.Gordon Brown he would just fiddle the numbers who suit whatever he

:45:29. > :45:34.wants to say, this Government can't do that. We set-up an independent

:45:34. > :45:39.vigorous process and we will have to see what they say in December.

:45:39. > :45:43.We come back to this phrase. I ask you again if you are adding, let's

:45:43. > :45:47.take your calculations, half a trillion more to the national debt,

:45:47. > :45:52.if as is clear to everybody including the Financial Times that

:45:52. > :45:58.you will fail to hit your debt target, I don't understand how you

:45:58. > :46:03.are making progress on rebalancing the economy away from debt?

:46:03. > :46:06.Let me explain that, Andrew. The deficit is the key part to getting

:46:06. > :46:12.the debt under control at the beginning. The deficit is the

:46:12. > :46:19.amount we add to the debt each year. The deficit was �159 billion when

:46:19. > :46:25.the Government came to to power it is down by a quarterment that will

:46:25. > :46:29.keep coming down. That's the objective for this Government.

:46:29. > :46:32.Clearly, you cannot get rid of a deficit of that size overnight. No

:46:32. > :46:35.one would recommend that. As the Chancellor just said, we have got

:46:35. > :46:38.to deal with this problem because we can see what happens to

:46:38. > :46:42.countries that don't have a credible plan, although it takes

:46:42. > :46:46.time, it is a credible plan, the financial markets understand that

:46:46. > :46:56.and that's key as we are having to sell bonds in the market and if we

:46:56. > :46:57.

:46:57. > :47:50.Apology for the loss of subtitles for 53 seconds

:47:50. > :47:55.Are you predicting the deficit will be smaller this year than last year

:47:55. > :48:00.despite the figures of the first five months? Because we have an

:48:00. > :48:04.independent process of setting - coming up with numbers and setting

:48:04. > :48:10.predictions it's not my job. can't do that? What I will tell you

:48:10. > :48:15.is that I think you have Chris Leslie there, the independent IFS

:48:15. > :48:18.has said this year under Labour's plans the debt would be 200 billion

:48:18. > :48:21.higher than under this Government. Although it's taken us time to

:48:21. > :48:24.bring it under control, the point is that under Labour it would be

:48:24. > :48:29.far higher which means our economic challenge would continue for a lot

:48:29. > :48:32.longer. Let me put that point to Mr Leslie? This is a man and

:48:32. > :48:37.Government that don't understand what drives a deficit and drives

:48:37. > :48:41.the debt situation. Not a single mention there about the health of

:48:41. > :48:49.the economy, if you have a poorly economy, you are going to see your

:48:49. > :48:54.deficit... What about the point on the IMF forecast? There's been

:48:54. > :49:00.forecasts have been proven flakely before. They were saying...

:49:00. > :49:09.would be higher. Otherwise you macro economic stimulus is

:49:09. > :49:16.meaningless. What we have to do is have a focus on long-term deficit

:49:16. > :49:20.reduction. You have to stimulate the economy, get people back into

:49:20. > :49:30.work. The economy shapes the deficit. They don't understand that.

:49:30. > :49:37.

:49:37. > :49:42.$:STARTFEED. They think the answer to a debt problem is more debt.

:49:42. > :49:45.The Chancellor maybe the main event in Birmingham today, but other

:49:45. > :49:52.Cabinet Ministers are getting a look in on the conference stage.

:49:52. > :50:00.This morning, the new Transport Secretary Patrick McLoughlin gave

:50:00. > :50:04.his speech. If I may, I would like to tell you

:50:04. > :50:09.moi my story -- you my story. I am the son of a miner. I am the

:50:09. > :50:17.grandson of a miner. I went to work in the Staffordshire coalfields up

:50:17. > :50:24.the road from here. Before I go on, I want to make one point clear - if

:50:24. > :50:34.you want to understand one nation, Mr Miliband, I'll show you one

:50:34. > :50:35.

:50:35. > :50:38.nation. APPLAUSE

:50:38. > :50:40.He is He is standing at this podium. I am a one nation Tory and it is

:50:40. > :50:50.this party over the generations that has given people the

:50:50. > :51:08.

:51:08. > :51:09.opportunity from whatever their background.

:51:09. > :51:12.APPLAUSE Now, some things have changed since

:51:12. > :51:15.I first went on the ground at the Upton colliery, in the year that

:51:15. > :51:18.Margaret Thatcher won her first general election, I put on a few

:51:18. > :51:21.pounds, well a few more than that! I put on a suit. My hair has gone a

:51:21. > :51:26.bit greyer, but one important thing has not changed and that is our job

:51:26. > :51:32.in Government today is exactly the same as it was all those years ago.

:51:32. > :51:38.To deal with our debts, to go for growth, and to get this country

:51:38. > :51:45.moving again. And as Transport Secretary, I will be doing my bit.

:51:45. > :51:51.I don't hide from the challenge. There will be setbacks as well as

:51:51. > :52:01.successes. Last week, when we hit one on the West Coast line I came

:52:01. > :52:02.

:52:02. > :52:04.straight out and confronted it and we will put things right.

:52:04. > :52:06.APPLAUSE Well, that was Patrick McLoughlin

:52:06. > :52:10.on the conference stage and he joins us now from Birmingham.

:52:10. > :52:14.Welcome to the Daily Politics. Let's talk about the West Coast

:52:14. > :52:18.Main Line rail franchise, Philip Hammond said yesterday he would

:52:18. > :52:25.have checked the figures on a deal like this when he was Transport

:52:25. > :52:30.Secretary. Did just teen Greening check it? Ministers asked for

:52:30. > :52:35.robust reassurance. They were given that. The errors that were exposed

:52:35. > :52:40.last week which I made the announcement, came out late after a

:52:40. > :52:44.substantial getting ready for a legal case. As soon as I saw the

:52:44. > :52:48.legal advice, I made the announcement I made.

:52:48. > :52:52.Justine Greening didn't check the figures, she just took the advice

:52:52. > :52:57.given to her? No, it wasn't a Minister for Ministers to check

:52:57. > :53:00.that advice. The way in which ministers have to deal with these

:53:00. > :53:04.procurement measures, they are kept separate from the process and

:53:04. > :53:09.actually, if ministers did start to get involved in the process down

:53:09. > :53:12.the line, I think there would be acsays that somehow we were trying

:53:12. > :53:16.to influence the outcome. There has to be a completely impartial

:53:16. > :53:21.approach by ministers to the companies which are bidding and

:53:21. > :53:23.that's what Justine did. Is it fair to say that civil

:53:23. > :53:28.servants, the ones dealing with the figure that is you are talking

:53:28. > :53:32.about are to blame? Surely, as a minister, as a Secretary of State,

:53:32. > :53:37.you are responsible for what goes on in your department?

:53:37. > :53:41.Well, look, I set-up two inquiries. One to look at happened as far as

:53:41. > :53:45.the department is concerned and the other to look at the wider issues

:53:45. > :53:51.for franchising and I don't want to prejudge the outcome of those

:53:51. > :53:55.inquiries. This particular lesson, this issue I have been hit and the

:53:55. > :54:00.lessons I have got to learn from it and the lessons the Government has

:54:00. > :54:07.to learn are serious and a lot of money has been wasted and I deeply

:54:07. > :54:12.regret that and it is untenable. Are you happy to say that ministers

:54:12. > :54:16.must take some responsibility for that too? No, I want to see what

:54:16. > :54:19.the inquiry actually comes forward with. As I say, ministers do not

:54:19. > :54:22.get involved in the detailed process of of what happens with

:54:23. > :54:27.those bids. Let's look at the franchise system

:54:27. > :54:30.then. Does the system need to to change? Is it fundamentally flawed

:54:30. > :54:35.to expect companies companies bidding for the franchises to

:54:35. > :54:42.predict revenue revenue over a period of 15 years? Well, what I

:54:42. > :54:46.say, there are different lengths and they are not 15 years. OK, but

:54:46. > :54:51.it is a long period of time? let me deal with the point. Because

:54:51. > :54:54.that's what I set-up an inquiry. I don't want to prejudge what the

:54:54. > :55:02.inquiry will tell me. It would be silly to say, "I have set this

:55:02. > :55:06.inquiry up. By the way this is what I think what has gone wrong in this

:55:06. > :55:11.process process." That's what the inquiry is for. I asked a respected

:55:11. > :55:14.person from the rail to do the one on franchising and I I asked

:55:14. > :55:19.someone else to do another one on the department.

:55:19. > :55:24.What about asking Virgin to continue to run the line while you

:55:24. > :55:28.sort this out? There are, I will be making a statement next week to

:55:28. > :55:32.Parliament and I will be able to deal with this issue then.

:55:32. > :55:34.So you will detail whether Virgin will be continuing to run that

:55:34. > :55:39.line? I hope to be in the position to

:55:40. > :55:43.make a full stapelght next Monday to Parliament -- statement next

:55:43. > :55:49.Monday to Parliament and I hope to set out the position.

:55:49. > :55:59.The other is that State rail takes it over. When it comes to the to

:55:59. > :56:01.

:56:01. > :56:06.the franchises being open again for bidders, why didn't you let

:56:06. > :56:09.directly operated bid for that too? The private sector has done a lot

:56:09. > :56:14.to increase passenger numbers. The rail industry in this country has

:56:14. > :56:16.been a success, because we have seen growth in rail travel like no

:56:16. > :56:19.other European country and that has been brought about having the

:56:19. > :56:26.private sector involved. You have the French and the Dutch

:56:26. > :56:34.State owned companies bidding for the franchises, why not have

:56:34. > :56:42.Directly Operated Rail? We want to get into the sector Directly

:56:42. > :56:45.Operated Rail. The Government underwrites it. While we have got

:56:45. > :56:49.Directly Operated Rail operate ago particular franchise because under

:56:49. > :56:52.the last Government the franchising system that they had failed.

:56:52. > :56:57.You would be happy for foreign State owned companies to run the

:56:57. > :57:02.line rather than our own? I would be happy to get good

:57:02. > :57:06.railway services in this country for the public to use. The taxpayer

:57:06. > :57:12.is putting a huge amount of money into the rail lines and what I have

:57:12. > :57:15.got to do, what my job is to do is to make sure the taxpayer gets a

:57:15. > :57:25.return for the investment it makes and we get good services too.

:57:25. > :57:29.

:57:29. > :57:33.But why not open it up to our own state owned Directly Operated Rail?

:57:33. > :57:38.I would prefer to see private companies running it.

:57:38. > :57:42.Timetable for the inquiries. Can you tell how long they will last?

:57:42. > :57:48.The first inquiry should report to me by the 31st October. That is not

:57:48. > :57:53.far away. That's the departmental one. The Richard Brown inquiry, I

:57:53. > :57:57.asked him to report by the 31st December. They are on tight time

:57:57. > :58:01.scales. But I hope they will be able to to report in that time.

:58:01. > :58:06.On to rail fares. Now there has been discussion about rail fares

:58:06. > :58:10.being capped at 1% over inflation. It was going to be at 3% over

:58:10. > :58:13.inflation. What changed your mind? Well, we are looking, we are always

:58:13. > :58:18.looking at the best way we can help the consumer. And that's what

:58:18. > :58:22.changed our minds. We want to help the consumer. Those people as the

:58:22. > :58:26.Chancellor said today, the hard- pressed workers doing the right

:58:26. > :58:29.thing. The commuter and the long distance traveller too.

:58:29. > :58:34.Thank you very much. We have run out of time.

:58:34. > :58:43.Just to find out the answer to our quiz. Which famous name is David

:58:43. > :58:50.Cameron following on Twitter? Do we know what the answer is?