:00:36. > :00:40.Good afternoon, and welcome to the Daily Politics. It's the eve of the
:00:41. > :00:44.Budget and today the coalition's talking about childcare. They're
:00:45. > :00:49.going to give working parents state help worth up to ?2,000 a year per
:00:50. > :00:55.child. It's a big offer, but it won't kick in until the autumn after
:00:56. > :00:58.the general election. And I want to know what George Osborne will have
:00:59. > :01:03.in his budget tomorrow for ordinary working people. A mansion tax? A new
:01:04. > :01:06.10p rate of tax? I'm not holding my breath.
:01:07. > :01:11.The referendum on Scottish independence is only six months
:01:12. > :01:14.away. What does it mean for people on Orkney and Shetland, who might
:01:15. > :01:17.have more in Common with the Vikings than the Celts?
:01:18. > :01:21.And did we mention it's nearly time for the Budget? We'll talk about
:01:22. > :01:28.what it's like to be in the Treasury before one of the biggest political
:01:29. > :01:32.events of the year. All that in the next hour, and who
:01:33. > :01:36.better to join us the day before a Budget than a man who knows a thing
:01:37. > :01:40.or two about being chancellor in tricky times and during a recovery.
:01:41. > :01:44.Norman Lamont held up the famous red Budget box three times, and on at
:01:45. > :01:49.least one occasion all it had in it was a bottle of whisky. More on that
:01:50. > :01:53.later, but for now, welcome to the show.
:01:54. > :01:57.First, let's look at what could only be described as a bit of an Eton
:01:58. > :02:00.mess in the Conservative Party. Over the weekend, Education Secretary
:02:01. > :02:03.Michael Gove said it was "preposterous" that so many members
:02:04. > :02:08.of the Prime Minister's inner circle were old Etonians. David Cameron,
:02:09. > :02:12.who's not exactly fond of the continuing focus on his alma mater,
:02:13. > :02:20.was apparently furious. According to the Spectator, he told Gove he was
:02:21. > :02:24."bang out of order". Sounds like he was channelling an episode of the
:02:25. > :02:27.Sweeney there. Well, last night the Tory peer Sayeeda Warsi chipped in
:02:28. > :02:34.to the debate, and hasn't exactly calmed things down. Here she is on
:02:35. > :02:39.ITV's the Agenda. Mine is this one, which is the story that we had
:02:40. > :02:46.earlier this week. About Michael Gove talking about people at the
:02:47. > :02:51.top, at the top of cabinet. So it is Number Ten takes Eton mess off the
:02:52. > :02:55.menu and replaces it with bread and butter pudding. So that business
:02:56. > :02:59.about looking for a new job on Wednesday. Michael was making an
:03:00. > :03:04.incredibly serious point, it can't be right that the 7% of kids who go
:03:05. > :03:09.to independent school end up at the top tables not just of politics but
:03:10. > :03:12.banking and law and every other profession, what Michael wants to
:03:13. > :03:19.create is a first class world class state system, which means in future
:03:20. > :03:22.years you will have more pupils from state schools round the Cabinet
:03:23. > :03:27.table. With that was a helpful intervention? I am not sure. It
:03:28. > :03:33.sounded cur you but the basic point is right, that what Conservatives
:03:34. > :03:36.believe this is a society lifting up the ladder for everybody to be able
:03:37. > :03:40.to get to the top in whatever profession, you don't do that by
:03:41. > :03:45.making private education illegal or something like that, or taxing them
:03:46. > :03:50.out of existence, you ought to be proud of the fact we have good
:03:51. > :03:54.private school, but the object is to increase the state system, and make
:03:55. > :04:01.it better and better. But issue -- is she right that the appearance of
:04:02. > :04:05.a number of old Etonians round the table at Number Ten will David
:04:06. > :04:10.Cameron reinforces a fact, really, that the top jobs in politics, and
:04:11. > :04:16.other industries and ways of life are dominated by the small number of
:04:17. > :04:21.people who go to the top Private And public schools. I don't think every
:04:22. > :04:25.time people look at David Cameron or Boris Johnson, they think went to
:04:26. > :04:30.Eton, Boris is one of the most popular politician -- politicians in
:04:31. > :04:33.the country. Thinks company Tays to and politician who are obsessed with
:04:34. > :04:38.this. What people really want to know is that the people who have the
:04:39. > :04:44.jobs are competent and can do a good job. I read the Michael Gove
:04:45. > :04:47.interview, and although he said it was preposterous, I understand why
:04:48. > :04:52.he says that, it is an extraordinary coincidence, really, but he was
:04:53. > :04:57.saying how he thought all the people who were old Etonians in Number Ten
:04:58. > :05:02.were good at their jobs, Should he not have said it? I think perhaps
:05:03. > :05:05.the word preposterous wasn't too helpful. In context it was
:05:06. > :05:09.reasonable. What about looking ahead, I mean there have and has
:05:10. > :05:14.been speculation that one of the reasons that Michael Gove has been
:05:15. > :05:18.talking about let us not have another old Etonian at the top is to
:05:19. > :05:24.in some way prevent Boris Johnson becoming the next leader, would it
:05:25. > :05:29.be preposterous if another old Etonian became leader of the can't?
:05:30. > :05:34.I don't think that is what he had in the Conservative Party. I think he
:05:35. > :05:39.is Education Secretary, was making the point as about how you need to
:05:40. > :05:42.improve the state system, so that this situation doesn't keep
:05:43. > :05:47.happening. Right. I mean, is it now time for people to stop talking
:05:48. > :05:51.about the schools that various politicians went to, you say it
:05:52. > :05:58.doesn't impact the public, it is more of a media or a political
:05:59. > :06:01.invention, but do you think it has a subliminal message to voters? I
:06:02. > :06:05.don't think it has very much impact. I really don't. As I say, Boris
:06:06. > :06:09.Johnson, I don't think the people think what school he went to, I
:06:10. > :06:13.don't think they think that with David Cameron. What school did you
:06:14. > :06:22.go to? I went to a Scottish school a rival of Tony Blair's school. A
:06:23. > :06:26.rival of Fettes. Now, regular viewers of the Daily Politics, is is
:06:27. > :06:30.there any other kind will know we are keen to cut costs, and so we
:06:31. > :06:35.have been auditioning for an MP to join me an a -- and Andrew in the
:06:36. > :06:41.studio and take care of the hard bits. Have a look at how Tim Farron
:06:42. > :06:45.and Grant Shapps got on. Back in 2010 one of Nick Clegg's key
:06:46. > :06:50.election promises was to raise the income tax threshold to ?10,000 a
:06:51. > :06:55.year. A tax cut of ?700 for 25 million people. Now at the time,
:06:56. > :06:58.David Cameron said the idea was unaffordable, but from next month
:06:59. > :07:01.that idea becomes a reality. In fact, the Conservatives like the
:07:02. > :07:04.policy so much they like to pretend it was their idea in the first
:07:05. > :07:08.place. Ed Miliband and the Labour Party have tried to attack the
:07:09. > :07:13.Government's long-term economic plan, by claiming that it would lead
:07:14. > :07:17.to the disappearance of a million jobs. But Ed Miliband's prediction
:07:18. > :07:22.was wrong. By backing small business, and reducing jobs taxes
:07:23. > :07:26.the Conservative-led Government has helped the economy to create more
:07:27. > :07:30.jobs than ever before. Well, that was Liberal Democrat
:07:31. > :07:33.party President Tim Farron, followed by Grant Shapps, talking about the
:07:34. > :07:37.economic policies is of their respective party, next up, to have a
:07:38. > :07:42.go at the Daily Politics's big board, it is a very difficult job is
:07:43. > :07:46.Shadow Energy Secretary Caroline Flint. Here she is talking about
:07:47. > :07:50.Labour's plan for the economy. Tomorrow, millions of people will
:07:51. > :07:54.want to know how the Chancellor will help to make life easier. Labour has
:07:55. > :08:00.always wanted people to get on in life. That is why we introduced the
:08:01. > :08:05.national minimum wage. So what should George Osborne do? I believe
:08:06. > :08:09.he should bring in a new 10p starting rate of income tax. It is
:08:10. > :08:12.not a new idea, it was first introduced by the last Labour
:08:13. > :08:17.Government, and it was a mistake to remove it.
:08:18. > :08:23.A 10p rate would say 24 million taxpayers ?100 a year. It is a small
:08:24. > :08:28.affordable measure to help off set the cost of living crisis. So how to
:08:29. > :08:32.pay for it? Labour would introduce a mansion tax for properties worth
:08:33. > :08:38.over ?2 million and we would get rid of the marry couples tax allowance,
:08:39. > :08:43.this daft policy will help one third of marry couple, 84% of the gainers
:08:44. > :08:47.will be men, and just one in six families with children will benefit.
:08:48. > :08:54.And what is more, people don't get married or stay together for the
:08:55. > :08:56.sake of ?3.85 a week. At tomorrow's budget David Cameron and George
:08:57. > :09:02.Osborne will probably try to do another victory lap. But working
:09:03. > :09:11.people are 16 hundred Mourinho a year worse off than in 2010. --
:09:12. > :09:16.?1400 a year. -- ?1600 a year.
:09:17. > :09:19.Well, cue the applause, you did a marvellous job, like you two
:09:20. > :09:24.predecessor, come and sit down an join us for a discussion on what you
:09:25. > :09:31.talked about in that big board. Are too many people in your mind 5.3
:09:32. > :09:34.million says HMRC paying the higher 40 pence tax rate? I think, you
:09:35. > :09:38.know, people are concerned about that, but I think it is about having
:09:39. > :09:43.a fair policy at the low and middle-income level. That is why we
:09:44. > :09:47.believe the 10p starting race should be reintroduced and on top of the
:09:48. > :09:51.extension of the personal allowance, in these difficult times, it is
:09:52. > :09:57.about making difficult choice, what I wouldn't be doing is giving a ?3
:09:58. > :10:00.billion tax cut to people everyone over 150,00 pounds a year. I could
:10:01. > :10:06.think of other things to do with that. We will come to the 10p
:10:07. > :10:08.starting rate of tax and that being Rhone produced. On the 40 pence,
:10:09. > :10:12.there has been discussion about that, is it something that you think
:10:13. > :10:17.Labour should raise the threshold on? Our priority is in terms of the
:10:18. > :10:21.place we are in at the moment, with the recovery not being a recovery
:10:22. > :10:25.for people on low and middle-incomes is toed a dress at the bottom end.
:10:26. > :10:29.Those people up to the higher rate, also benefit from the extension for
:10:30. > :10:35.the personal tax allowance. Wouldn't be a priority. What would be a
:10:36. > :10:40.priority for is getting the 10p tax rate reintroduced but cutting the 3
:10:41. > :10:45.billion give away. That is our priority. Why should the 40 pence
:10:46. > :10:48.tax rate by a priority for a number of people in the Conservative Party?
:10:49. > :10:53.We heard from Nick Clegg that overall, even people who have been
:10:54. > :10:57.taken into that tax rate pay less tax overall? When it was first
:10:58. > :11:01.introduced by Nigel Lawson it applied to one in 20 people. It was
:11:02. > :11:07.intended to be the top rate of tax. It is now dragged in more and more
:11:08. > :11:11.people, so it is now one in six, it is forecast that next year, it will
:11:12. > :11:17.be six million people paying this tax rate. That includes nurses,
:11:18. > :11:22.teachers, tube drivers, Warrant Officers in the army, policemen as
:11:23. > :11:26.well. So there many people not remotely wealthy who are affected by
:11:27. > :11:29.this. It also has a long-term structural problem, that you are
:11:30. > :11:34.taking people out of tax, and financing it by making people higher
:11:35. > :11:41.up, but who are not wealthy, pay more. In the long run with that is
:11:42. > :11:44.not sustainable. What about the fact it could be aspirational. The
:11:45. > :11:48.indication from George Osborne people who get pulled into that are
:11:49. > :11:53.more likely to vote Conservative? Well, I think he denied what was
:11:54. > :11:56.attributed to be saying to him, if the argument was put it would mean
:11:57. > :12:00.that higher taxes were saving people's lives because it was
:12:01. > :12:04.causing them not to work too hard. I don't believe he said anything like
:12:05. > :12:07.that. Do you accept that in the current state of play, people in
:12:08. > :12:12.that tax bracket overall, because of the raising of personal allowances
:12:13. > :12:16.are paying less tax overall? They are benefitting compared with how
:12:17. > :12:20.they otherwise would have been. Obviously, we started off with a
:12:21. > :12:25.system that we thought was fair, people paying 40% at a particular
:12:26. > :12:29.band of income, it has been lowers twice, since the coalition came to
:12:30. > :12:34.power, that is the problem. No-one is saying that it isn't right to
:12:35. > :12:39.raise allowances, merely there ought to be a balance between the two.
:12:40. > :12:43.Right. Isn't it dangerous for Labour to revisit this idea of Rhone fro
:12:44. > :12:47.Tuesdaying the 10p rate of tax when it was a disaster when it was
:12:48. > :12:51.scrapped. It wasn't a disaster, it was a good policy and we were wrong
:12:52. > :12:55.to get rid of it. What it is about is making sure once you leave your
:12:56. > :12:59.tax free personal allowance, instead of going on a cliff edge to pay 20
:13:00. > :13:04.pence in the pound we suggest you pay 10p in the pound for the next
:13:05. > :13:07.slice. That is a good thing. It recognises the needs of those, if
:13:08. > :13:11.you like the bottom of our income ladder, but as an incentive to get
:13:12. > :13:15.into work and carry on working, and that is a good thing. How beneficial
:13:16. > :13:20.would it be for the average working person? What it would mean, we pay
:13:21. > :13:23.for it through the married couples allowance which the estimates are
:13:24. > :13:29.round 700 million and the estimates round a tax on properties over 2
:13:30. > :13:34.million is round ?2 billion. That what would do is ensure that roughly
:13:35. > :13:40.round, if you were earning ?1,000 over the personal allowance you
:13:41. > :13:45.would get ?100 back a year. We think we can do it within those areas. It
:13:46. > :13:49.is a small. It is quite small. I want to ask, because increasing the
:13:50. > :13:52.penal allowance to sok, because increasing the penal allowance to
:13:53. > :13:58.so,000 which is what is going to be proposed will be worth ?112. But
:13:59. > :14:01.that would be more beneficial This is Addington that, it is about
:14:02. > :14:07.recognising about the personal allowance and building on it so when
:14:08. > :14:12.people start paying tax they pay 10p in the pound instead of 20 pence.
:14:13. > :14:16.This is something we can afford through the measures I have outlined
:14:17. > :14:21.to pay force, it is says let us help work pay and encourage people at the
:14:22. > :14:26.bottom of the labour mark to go into work and carry on. What is your
:14:27. > :14:30.response to that? It is marginal. It is shuffling the deckchairs round
:14:31. > :14:35.but not making a significant difference. It is an added
:14:36. > :14:39.complexity, that is why Gordon Brown got rid of it in the first place.
:14:40. > :14:44.It's a crude measure. It is simpler to take people out than to have a
:14:45. > :14:48.lower rate, frankly. I am not violently against it. But, I mean,
:14:49. > :14:53.in the end is it is worth going through that amount of pain, and
:14:54. > :14:57.work and complexity, for what what is ?104 a year, instead of raising
:14:58. > :15:04.the allowance further, which gives people more? I know you will put it
:15:05. > :15:08.on top If I am given a choice, between giving a 3 billion tax cut
:15:09. > :15:13.to those earning over 150,000 and doing something to help those at the
:15:14. > :15:19.sharp end I would go for the latter. Labour is goes going to go on
:15:20. > :15:24.ability it until the next election, has the coalition shot themselves in
:15:25. > :15:28.the foot over that? No, the mansion tax will be another disaster for the
:15:29. > :15:32.Labour Party. It's a dangerous tax, the mansion tax, because I think a
:15:33. > :15:37.lot of people will have great difficulty in paying it it. It could
:15:38. > :15:42.have a big impact on the property market in the south, and lead to a
:15:43. > :15:53.chain reaction, I think you will find if it comes to it, it is a
:15:54. > :15:57.disastrous policy. We are consulting on the mansion tax and the
:15:58. > :16:03.fermentation of it. There are some issues that you are referring to,
:16:04. > :16:08.where people have a property worth ?2 million but no income coming in,
:16:09. > :16:12.and we are looking at that. But the truth is that anybody, in London or
:16:13. > :16:17.elsewhere in the country, if you have a property worth ?2 million,
:16:18. > :16:21.that is a major asset. This is about being fair but we are consulting on
:16:22. > :16:25.the details to get the implementation right. I think it is
:16:26. > :16:34.a fair balance of meeting different interests. I don't think it is fair
:16:35. > :16:37.to tax people on a liquid asset when they don't have a high income. We
:16:38. > :16:41.are having a consultation on that. Not many people live in ?2 million
:16:42. > :16:46.properties without an income. Have you got any idea about the numbers?
:16:47. > :16:51.Old people left in a house that they bought themselves and they are still
:16:52. > :16:56.there with no income? Not many people sit on ?2 million properties
:16:57. > :16:59.with a small income, not like the pensioners in my constituency.
:17:00. > :17:05.People looking at this are talking about tens of thousands. A working
:17:06. > :17:10.figure, and this is why we are consulting further, says that we
:17:11. > :17:16.could raise ?2 million a year. Why shouldn't people living in an asset
:17:17. > :17:20.rich way, and probably with a large income, and we are talking about
:17:21. > :17:25.London and the South East, why shouldn't they pay more? If
:17:26. > :17:31.democracy consists of trying to rob Peter to pay Paul, there is no doubt
:17:32. > :17:35.that Paul will not vote for that. But you cannot go on and on doing
:17:36. > :17:40.this and moving just in one direction. We are moving to a
:17:41. > :17:45.nonsensical tax system, where a very high proportion of income tax
:17:46. > :17:51.revenue is coming from a very small section of the population. The OECD
:17:52. > :17:58.warned about this the other day. The tax base in income taxed terms is
:17:59. > :18:02.coming becoming too narrow. The tax breaks for married couples, is that
:18:03. > :18:06.really a good idea for the amount of money people get? When I was
:18:07. > :18:10.Chancellor I abolish the married couples allowance but there seems to
:18:11. > :18:14.be a move to bring it back. You agree with Labour on this one? I
:18:15. > :18:18.think if there is a married couples allowance, you have to answer one
:18:19. > :18:23.awkward question. Why should a couple with no children get the tax
:18:24. > :18:28.allowance that is designed really for people with children? I think
:18:29. > :18:33.the better route is actually to target children. All right. Thank
:18:34. > :18:39.you, Caroline Flint, for doing the big board.
:18:40. > :18:42.David Cameron and Nick Clegg have been visiting a nursery this morning
:18:43. > :18:46.to announce the coalition's big new plan to help families with the cost
:18:47. > :18:49.of childcare. So what are they offering? The Government said a year
:18:50. > :18:53.ago that it would provide support of up to ?1,200 per child. That has now
:18:54. > :18:57.increased, so parents paying ?10,000 a year on childcare could get ?2,000
:18:58. > :19:01.from the state. Up to 1.9 million families with children under 12 will
:19:02. > :19:04.be eligible. They can claim the cash as long as both parents work and
:19:05. > :19:12.they earn less than ?150,000 a year each. Labour says this policy is too
:19:13. > :19:15.little too late. Their own plan is to extend school hours and increase
:19:16. > :19:19.the number of free childcare hours per week. Let's hear what Nick Clegg
:19:20. > :19:22.had to say earlier today. David Cameron and Nick Clegg have
:19:23. > :19:25.been visiting a nursery this morning to announce the coalition's big new
:19:26. > :19:28.plan to help families with the cost of childcare. In the help that we
:19:29. > :19:31.are giving to people who face high childcare costs, and the worst thing
:19:32. > :19:35.to do is to raise people's hopes that they will get support for
:19:36. > :19:40.childcare costs, though we think it is better to say to people that we
:19:41. > :19:45.have looked at this carefully and say this is a total change in the
:19:46. > :19:49.way we provide support. Basically tax free childcare support and 2
:19:50. > :19:53.million families will be helped. Politically we could rush to get it
:19:54. > :19:56.implemented this September but our fear is that it would not work in
:19:57. > :19:59.practice if we did that and we want this to work in practice so that
:20:00. > :20:05.millions of people feel they have more help with high childcare costs
:20:06. > :20:11.than they do today. The plan is to introduce it next autumn. We are
:20:12. > :20:17.joined by the Lib Dem MP Lorely Burt and Caroline Flint is still with us.
:20:18. > :20:23.Is it fair that this benefit would be available for couples who can
:20:24. > :20:27.earn up to ?150,000 each? I think it is unequivocally good news. Not my
:20:28. > :20:31.words but the words of the Child poverty action group. If they think
:20:32. > :20:36.it is a good thing, we are on the right track. In the narrative about
:20:37. > :20:43.austerity and they're being not much money, and no giveaways, why is it
:20:44. > :20:47.that a household income of ?300,000, the people living there
:20:48. > :20:52.deserve that kind of tax break? That is the absolute maximum that you
:20:53. > :20:59.have identified. At the other end, the measures we are doing are
:21:00. > :21:02.specifically targeted to the most disadvantaged children and the
:21:03. > :21:07.families with the least income. For example, universal credit. Fantastic
:21:08. > :21:12.that we are going to find 85% of childcare for anyone striving to get
:21:13. > :21:16.off benefits and into work. It is a generous offer in cash terms, if you
:21:17. > :21:24.want to look at it that way, at a time when there is not much money.
:21:25. > :21:28.You support it? It is up to ?2000 per year and those with the highest
:21:29. > :21:34.childcare costs will probably hit the top end. I am not against it but
:21:35. > :21:38.what worries me is that over the last four years, families with
:21:39. > :21:42.children have lost ?1500 per year from child support. This policy has
:21:43. > :21:47.been announced before. A classic Budget situation, not coming in for
:21:48. > :21:51.another year. It is on a wish list for tomorrow. We have seen for the
:21:52. > :21:56.last few years that the cost of living has gone up and childcare has
:21:57. > :22:00.gone up as well. In some areas, childcare has disappeared because it
:22:01. > :22:04.has not been a viable business because parents cannot afford it.
:22:05. > :22:10.This is a massively important area. We believe our policy to provide
:22:11. > :22:13.extra powers for working parents for four -year-olds is a good one but
:22:14. > :22:20.really people with children have missed out over the last you years.
:22:21. > :22:25.I would prefer it to be more targeted. We wonder if we are giving
:22:26. > :22:34.too much by upping the threshold for the 40p rate. That applies at an
:22:35. > :22:38.income of ?41,000. You know, I welcome the policy, but I think in a
:22:39. > :22:45.way it should be more targeted. What are you doing for stay at home
:22:46. > :22:50.mothers? Well, lots of things. As far as income is concerned, we are
:22:51. > :22:55.raising the threshold at which the partner will start to pay income
:22:56. > :23:00.tax. This wouldn't help stay at home mothers. Well, no, but staying at
:23:01. > :23:05.home is a choice. This policy is specifically targeted at women who
:23:06. > :23:11.want to go out to work. I applaud the fact that we are helping in this
:23:12. > :23:17.way. If you have got two children under the age of 12, you could get a
:23:18. > :23:23.maximum of ?4000 with childcare. The cost of childcare has been
:23:24. > :23:28.identified as a huge challenge to parents who do want to work. What
:23:29. > :23:33.about looking at the childcare itself and childminders? There was a
:23:34. > :23:38.proposal that was sidelined or dropped for childminders to take
:23:39. > :23:43.care of more children. Why not look at that? The Liberal Democrats are
:23:44. > :23:50.not very keen on expanding the number of children that one
:23:51. > :23:55.childminders can look after. We feel that each child deserves a minimum
:23:56. > :23:59.quality, and amount of time and attention. That is why we were not
:24:00. > :24:05.particularly keen on pursuing that policy. And that will not be looked
:24:06. > :24:11.at again? I don't know. It is above my pay grade to comment on that! You
:24:12. > :24:15.mentioned the wraparound childcare that your party is proposing. How
:24:16. > :24:19.would you pay for it? It is about making sure that in our schools, the
:24:20. > :24:24.ideal community to offer before and after childcare, that there is an
:24:25. > :24:32.obligation to provide it. They do already. Not all of them. I met
:24:33. > :24:37.someone whose primary school opens at 7am in Mansfield. That allows her
:24:38. > :24:42.to drop off her son and get to work. That is not the case in every
:24:43. > :24:46.school and we wanted to be a statutory responsibility for every
:24:47. > :24:49.school to provide it. It is not necessarily about paying for it. On
:24:50. > :24:53.the payment side, we have said we want to extend and pay for it
:24:54. > :24:58.through the childcare levy, extending 15 hours to 25 hours where
:24:59. > :25:05.both parents are working. That is helping the supply side. OK, but
:25:06. > :25:08.first of all you want to make sure state provision is there in the
:25:09. > :25:15.first place. Then you want it to be paid for? You can provide through
:25:16. > :25:18.these allowances or other means support for childcare but we have to
:25:19. > :25:24.stimulate the supply side as well. One of the ways to do that, schools
:25:25. > :25:27.is the ideal place to provide for school-age children and to make that
:25:28. > :25:33.happen. How much does the levy give you to spend on this? We have worked
:25:34. > :25:39.out it gives us enough to provide ten hours a week extra for working
:25:40. > :25:43.parents and we have been working on that. Around 700 million or
:25:44. > :25:48.something like that. Unfortunately we have been counting how many times
:25:49. > :25:56.Labour have spent the bankers' levy and we are up to 11. You have said
:25:57. > :26:00.you will spend it in different ways. You have no way of actually paying
:26:01. > :26:05.for it right now. It is economic league incoherent. Just to be clear
:26:06. > :26:09.for you and anyone watching, the banking levy will just pay for the
:26:10. > :26:14.extended childcare. The banking bonus will go towards the jobs
:26:15. > :26:19.guarantee. And those are the only two commitments? The banking bonus
:26:20. > :26:26.and removing tax relief for those earning over 150,000. And the
:26:27. > :26:29.banking levy for the extension for three and four-year-olds, and the
:26:30. > :26:34.mansion tax will pay for the 10p starting rate. So those promises
:26:35. > :26:41.that you have accused Labour of making without costing them, they
:26:42. > :26:45.have gone? If they have all gone, what are they going to do to restore
:26:46. > :26:49.the economy? They have no way of paying for all the other things that
:26:50. > :26:55.we have counted as costing up to ?30 billion. They have no way of paying
:26:56. > :27:00.for all of that. I don't want to keep repeating myself. These are
:27:01. > :27:05.proposals that we have said we will have and we will pay for and we have
:27:06. > :27:12.identified how we will pay for them. Moving to the general election, we
:27:13. > :27:15.will look at other matters, but we will stay within spending limits.
:27:16. > :27:19.Thank you. Tomorrow there will be full coverage
:27:20. > :27:27.of the Chancellor's statement on BBC Two from 11:30am. If you want to
:27:28. > :27:30.comment you can text your views to 61124 or use the hashtag budget2014.
:27:31. > :27:34.Crimea has always been part of Russia. That is the message from
:27:35. > :27:41.Vladimir Putin at a speech at the Kremlin. He has been speaking two
:27:42. > :27:49.days after a referendum in Crimea on Sunday. The vast majority opted to
:27:50. > :27:52.leave Ukraine. Now they are exploring possibilities for Crimea
:27:53. > :27:58.to join the Russian Federation. This is a flavour of what Putin had to
:27:59. > :28:07.say. On the 17th of March in Crimea, there was a referendum in
:28:08. > :28:13.full correspondents with democratic procedures and legal norms. 80% of
:28:14. > :28:17.voters took part in the referendum. More than 96% voted for
:28:18. > :28:25.reunification with Russia. These figures are more than convincing.
:28:26. > :28:28.Norman Lamont, it has happened. The referendum has happened. Crimea is
:28:29. > :28:33.to all intents and purposes annexed back to Russia, if you like. What
:28:34. > :28:38.can the West do now? I don't think there is a huge amount of the West
:28:39. > :28:42.can do but it must be seen to do something. The sanctions that are
:28:43. > :28:47.being put forward are at least something. It is a start. Listening
:28:48. > :28:52.to what Vladimir Putin was saying, he was saying that the figures were
:28:53. > :28:56.convincing. I don't personally doubt that the majority of people in
:28:57. > :28:59.Crimea want to join Russia. But I think the criticism is that it
:29:00. > :29:04.should have been done in an orderly, very transparent way. It
:29:05. > :29:10.was rushed. There was no actual register of voters. There was also
:29:11. > :29:14.probably a certain amount of intimidation from the presence of
:29:15. > :29:18.Russian troops being on the streets and not in their barracks. It is
:29:19. > :29:23.rather chilling and the great worry is about what will happen in other
:29:24. > :29:26.parts of eastern Ukraine, where there are Russian minorities. That
:29:27. > :29:32.is the fear of some Ukrainians and Western politicians. Do you think
:29:33. > :29:36.that the posturing, has some Russian commentators have called it, by
:29:37. > :29:40.Western leaders of denouncing what Vladimir Putin had done, that the
:29:41. > :29:47.troops were going into Crimea, actually forced his hand. If he had
:29:48. > :29:50.said that you have some legitimate claim to Crimea, let's negotiate on
:29:51. > :30:12.the future of the semi-autonomous region, then that might have
:30:13. > :30:16.de-escalated things a bit more. 300 warships there and a large number of
:30:17. > :30:24.aircraft as well, so it is very central to their defence, but this
:30:25. > :30:29.isn't the way to go about it, in a rushed referendum like that, I think
:30:30. > :30:33.we have got to be clear too, that ethnic Russians in Ukraine will be
:30:34. > :30:39.well treated. That has not always been the case in the Baltic, you
:30:40. > :30:43.know, some have not beenel treated. There will be genuine Russian
:30:44. > :30:47.anxiety, what is needed is communication and an understanding
:30:48. > :30:51.on both sides. Let us leave it there. It is one of the issues which
:30:52. > :30:55.rightly or wrongly is seen as something of a Conservative
:30:56. > :31:00.obsession. Europe. They took us in, but appear to have been fighting
:31:01. > :31:04.about it ever since. With the row of dominating the Premierships of
:31:05. > :31:07.Margaret Thatcher, John Major and perhaps David Cameron too. So just
:31:08. > :31:10.what is it about the Tories and Europe? We sent David round the
:31:11. > :31:20.corner to find out. We should warn you, there is some flash photography
:31:21. > :31:23.in this report. The old Conservative Central Office,
:31:24. > :31:27.the scene of Tory triumphs and tear, the power base of leaders whose
:31:28. > :31:32.times in office were often dominated by a single issue summed up in a
:31:33. > :31:40.single word. Europe. The Iran anyis that this place has
:31:41. > :31:44.been renamed Europe house and is the UK... Perhaps in a strange way that
:31:45. > :31:48.is quite appropriate, because from Ted Heath to David Cameron, Europe
:31:49. > :31:53.has been a touch stone issue, some might say a raw nerve for the
:31:54. > :31:57.Conservatives. Ted Heath took us in, Margaret Thatcher we'lled her
:31:58. > :32:00.handbag and said no a lot. John Major was driven to industrial
:32:01. > :32:06.language and David Cameron wants to stay in a reformed Europe while
:32:07. > :32:11.under pressure to get out. Michael Dobbs has had a ringside
:32:12. > :32:16.side. In central office under Thatcher and Major and with a key
:32:17. > :32:20.role in the EU Referendum Bill All parties are coalition and the
:32:21. > :32:24.Conservative is also a coalition, various interests in it. It has a
:32:25. > :32:30.tricks interest, a radical aspect to it. All of those it is happy
:32:31. > :32:36.together and most issues, but Europe does manage to bring out the
:32:37. > :32:41.different aspects of that coalition. John Major was hamstrung but people
:32:42. > :32:48.we might callure resceptics but he called something not suitable for a
:32:49. > :32:51.family show. Have they won the war? I think Euro-sceptic -- sceptics who
:32:52. > :32:55.are now running the Conservative Party, in the main, were of course
:32:56. > :32:59.correct. We rightly said that the euro would be a disaster and we
:33:00. > :33:04.helped others which that battle, so that Britain is not in the euro, now
:33:05. > :33:07.we are saying very clearly that we want a new relationship with the
:33:08. > :33:10.European Union and that is the view of our leader and Prime Minister
:33:11. > :33:18.David Cameron, so we are happy. There are happy to claim Margaret
:33:19. > :33:22.Thatcher as a Euro-sceptic champion. She got what she wanted, she took
:33:23. > :33:27.her handbag with her and I think we have achieved a huge amount under
:33:28. > :33:33.her Premiership for Europe. Let us remember that she was there at the
:33:34. > :33:37.forefront, voting, pushing us in the referendum in the '70s, to have a
:33:38. > :33:42.role in Europe, so I don't see her as a Euro-sceptic, I see her as a
:33:43. > :33:48.euro realist. So what would Mrs T tell Dave to do
:33:49. > :33:52.now? I think that Margaret Thatcher would probably be very supportive of
:33:53. > :33:57.the idea of a referendum. I think that she would be arguing that
:33:58. > :34:01.Europe has to change in the EU has to change radically, but I think
:34:02. > :34:04.that she would also not be saying right now, under any circumstance,
:34:05. > :34:10.no matter what happens to Europe, that we must get out.
:34:11. > :34:16.The party might live elsewhere, the times maybe different but Europe and
:34:17. > :34:22.the Conservative also have an interesting relationship, no matter
:34:23. > :34:27.whose name is above the shop. Laura Sandys joins us now. She is
:34:28. > :34:30.part of a group of pro European Conservative MP, behind the relaunch
:34:31. > :34:34.of the European mainstream group Yesterday. Welcome to the programme
:34:35. > :34:38.and lament is still with us. Why has Europe been such a thorn in the
:34:39. > :34:44.flesh for the Conservative Party, in a way it hasn't been for Labour? I
:34:45. > :34:49.think it is partly because Europe has become so integrated. When
:34:50. > :34:55.people originally supported our membership they didn't foresee it
:34:56. > :34:58.could become in ind greated, it would more towards becoming a
:34:59. > :35:02.political Europe rather than an economic idea. Side by side with
:35:03. > :35:07.that, and this I think is the real issue, it is a question of
:35:08. > :35:13.democracy, and accountability. Yes, as Laura says, and she puts things
:35:14. > :35:19.persuasively. Margaret Thatcher was good at getting deals, but we are
:35:20. > :35:24.more and more having regulations and laws that are the result of bargains
:35:25. > :35:29.done by Governments, behind closed doors, and the ability of Parliament
:35:30. > :35:34.to amend, to respond to voters' concerns is limited. Democracy is a
:35:35. > :35:39.bit of a one way street in Europe. You pass something after a lot of
:35:40. > :35:44.negotiation, you can never amend or reverse. On the regulation issue I
:35:45. > :35:49.think it is fascinating being half French. I see that the French don't
:35:50. > :35:53.implement EU regulations in the same way at all. That is a responsibility
:35:54. > :35:57.of what we in this country do. I think we have got to look at Europe,
:35:58. > :36:00.and I think we have to say to ourself, those people who want to
:36:01. > :36:05.come out, this would be the first time in modern history, that Britain
:36:06. > :36:09.would say we want less influence in Europe. We see where Europe is going
:36:10. > :36:13.at this moment. These are crises we have to be sitting round the table,
:36:14. > :36:18.we have got to be exerting our influence and Norman, you are right
:36:19. > :36:24.I think that Europe has become very internally focussed. We need to have
:36:25. > :36:31.ambition, externally beyond Europe to make sure we Powell weight. In --
:36:32. > :36:34.pull our weight. In your group, only round 18 members are prepared to
:36:35. > :36:42.acknowledge their position publicly. No, no, no. Many more. 45 people
:36:43. > :36:49.have been explicit... Some people... Are they ashamed? Not at all. 62
:36:50. > :36:53.backbencher, so there are more within the ministers as well. I
:36:54. > :36:57.think one has to say that this is a moment when you know, it is not
:36:58. > :37:02.always the most fashionable thing to be pro European in the Conservative
:37:03. > :37:07.Party, and I think we have an imme sieve group, cross section
:37:08. > :37:10.particularly of 2010 intake of MPs who are making the care, we need
:37:11. > :37:15.reform but we need to know our future is within Europe, and making
:37:16. > :37:19.and shaping Europe. Do you think the Eurosceptics have won the battle in
:37:20. > :37:24.the Conservative Party? I think that have won a lot the -- arguments but
:37:25. > :37:29.they will go on. Europe continues to evolve. More and more measures have
:37:30. > :37:34.been taken within the eurozone to shore up the euro, and some of
:37:35. > :37:38.those, the dangers is, dangers are, may apply to Britain, and yet
:37:39. > :37:43.Britain can be easily outvoted because it is not a member of the
:37:44. > :37:48.eurozone, it constitutes a majority, so we need at the very least to see
:37:49. > :37:54.measures taken for the euro, that have no relevance to us do not apply
:37:55. > :37:58.to us, so that is a minimum thing. I don't think there this is just about
:37:59. > :38:05.economic, I really do think the central question is actually about
:38:06. > :38:09.the reverse built of legislation, making things responsive so what
:38:10. > :38:15.electorates want. Do you think it is achievable? There are two things you
:38:16. > :38:19.can do. One you can have a red card system where national Parliaments
:38:20. > :38:27.say this soul not pass f you get more than one or two. Secondly a pet
:38:28. > :38:31.idea of my own, I think European legislation should all possibly have
:38:32. > :38:35.a sunset clause, it should be time limited, so that it has to come back
:38:36. > :38:38.to Governments, come back to national Parliamentments. That is
:38:39. > :38:44.the wish list. It is whether that can be renegotiationed. I agree.
:38:45. > :38:47.Your report is supportive of the Prime Minister's position, Shetland
:38:48. > :38:52.out a list of seven things hat the weekend. Are you happy with each
:38:53. > :39:00.one? New controls to stop vast migrations? The overall picture is
:39:01. > :39:03.very positive. Specifics though? What Norman says about sunset
:39:04. > :39:08.clauses I agree. I think we should do that in the UK as well. What we
:39:09. > :39:12.need is we need to have this debate. The Germans are very very interested
:39:13. > :39:16.in what David Cameron is saying, and is listening and responding
:39:17. > :39:21.positively. But not interested as Angela Merkel said in actually
:39:22. > :39:25.reversing treaties or having complete wholesale change to push
:39:26. > :39:31.them through. I am sure it matters to us, what we need to see is we
:39:32. > :39:34.need to see a more ambitious Europe in terms of external trade, the
:39:35. > :39:40.economic opportunities. Let us talk about that specific, vast migration,
:39:41. > :39:44.do you agree with him, there need to be new controls to stop vast nigh
:39:45. > :39:49.integration, presumably from new member states to established ones
:39:50. > :39:54.That would be something common. We have the controls over Romanian,
:39:55. > :39:58.Bulgarian, the Polish situation, we were one of the few countries who
:39:59. > :40:03.didn't put control, we have to look at them in terms of what creates and
:40:04. > :40:08.sustains those economies if they come into the EU, what we don't want
:40:09. > :40:11.do is be a brain drain any way. You can't, the Government can't hit
:40:12. > :40:15.immigration target, not because of new states, but because of the
:40:16. > :40:19.existing EU member, you accept that? What we are doing is putting in
:40:20. > :40:25.measures that curbing immigration, we are not... Not EU. You can't do
:40:26. > :40:27.anything about it. When he talks about new controls, he can't do
:40:28. > :40:31.anything about the existing member, that is true. That is where we are.
:40:32. > :40:36.He continue control a vast part of the migration. It is about being
:40:37. > :40:40.honest. I think those are things that David Cameron is talking about
:40:41. > :40:45.into the future, when we look at new, if there are going to be
:40:46. > :40:49.accession country, it is far away, as a proposition. Do you think David
:40:50. > :40:54.Cameron is a Europhile or Euro-sceptic? I think he is a euro
:40:55. > :40:58.realist. Like Margaret Thatcher. The point is we have a voice in Europe.
:40:59. > :41:02.Any Prime Minister who wants to reduce their voice in Europe would
:41:03. > :41:06.find, would not be working in Britain's interest. Do you agree
:41:07. > :41:12.with that? I hesitate to disagree with anything Laura says. Do. I do
:41:13. > :41:16.slightly. I would say about David, David as you may recall used to work
:41:17. > :41:21.for me, he used to write my speeches and I know he is Euro-sceptic.
:41:22. > :41:27.Right. Then that has put settlement to that argument. We are hear to
:41:28. > :41:31.persuade him. Thank you. The referendum on Scottish
:41:32. > :41:35.independent is six months away today. But what does it mean for the
:41:36. > :41:39.outlying regions of Scotland, in particular OK anyand the Shetland
:41:40. > :41:44.Islands? There have opinion called for greater autonomy. The shelters
:41:45. > :41:49.are a famously independent bunch, with many claiming to have more in
:41:50. > :41:55.common with Scandinavia than Scotland. In the Shetland village of
:41:56. > :42:00.Gulberwick hundreds of locals lit flaming torches to burn a especially
:42:01. > :42:08.built Viking long boat. It is one of a number of fire festivals that
:42:09. > :42:12.Shetlanders stage annually. Shetland is different from
:42:13. > :42:17.everywhere in the world. We do Viking events, we sell Brit it every
:42:18. > :42:25.year, and that is what we are here today doing. And by fortunate
:42:26. > :42:31.coincidence our guest of the day Norman Lamont was born in Shetland.
:42:32. > :42:37.Joining us from Shetland is the Vic Scot. What do you see as Home Rule
:42:38. > :42:43.for Shetland and OK anyislands? We want to make sure out of this big
:42:44. > :42:47.constitution at be bait we decide what we want. Edinburgh doesn't pay
:42:48. > :42:51.much attention to the island, the SNP have removed powers from all the
:42:52. > :42:54.Scottish islands over the past seven years while they have been the
:42:55. > :42:58.Government. Therefore, in this period, we are going to make sure we
:42:59. > :43:03.decide what is in our interests, and I think that includes a range of
:43:04. > :43:08.economic and social powers where we feel we can better take decisions
:43:09. > :43:14.about our future than having them imposed from Edinburgh. How would
:43:15. > :43:21.you do that? Well will work out some plan, there is a positive, our
:43:22. > :43:26.islands future initiative being taken forward, and they are looking
:43:27. > :43:31.at the kinds of powers we would like to see in Lerwick, and Stornoway and
:43:32. > :43:36.we will do that in a positive way. We will challenge both the UK and
:43:37. > :43:41.London and Edinburgh Governments to respond positively to that, because
:43:42. > :43:44.if we don't make our case, if we don't shout loudly about what we can
:43:45. > :43:48.do, they don't take any notice of us. We have been negotiating with
:43:49. > :43:52.the oil industry for the last 40 years with some success. Norman
:43:53. > :43:59.Lamont, if your experience, have these islands being treated badly,
:44:00. > :44:04.are they doing badly as a result of having self devolution in Holyrood.
:44:05. > :44:09.Can I say hello. I hope the island is looking beautiful, as it always
:44:10. > :44:15.does. I think what he is saying makes a lot of sense, that the
:44:16. > :44:19.islands could ask for more autonomy in the event of Scottish
:44:20. > :44:23.independence, that is what the Faroe Islands have, what the Channel
:44:24. > :44:27.Islands have, but the Faroe Islands are part of Denmark but at the same
:44:28. > :44:33.time have more self rule, more control over the Home Affairs. Of
:44:34. > :44:38.course as he knows better than I, there is a degree of control over
:44:39. > :44:45.the oil development that Scotland, Shetland has, it has special powers,
:44:46. > :44:51.it benefits from the oil revenue. The ironic point in this, a large
:44:52. > :44:56.part of The Verves of oil that Scotland say -- the reserves of oil
:44:57. > :45:03.Scotland have becomes because of the position of Shetland on the map. If
:45:04. > :45:05.Shetland declared independence, if it declared complete independence
:45:06. > :45:16.Scottish oil would go out the window. How much claim do the
:45:17. > :45:20.Shetland and Orkney islands have? We have some claim to the oil reserves.
:45:21. > :45:27.We can find the odd constitutional lawyer very happy to make that
:45:28. > :45:30.argument. Lawyers did so back in the 1970s when Scottish local Government
:45:31. > :45:37.was reorganised and when oil was discovered. We can have that again.
:45:38. > :45:42.The real point about oil and gas is that the developments West of
:45:43. > :45:45.Shetland are really important to the UK Exchequer. Alex Salmond does not
:45:46. > :45:51.have an economy of oil and gas does not happen, which gives Shetland
:45:52. > :45:55.some leverage over those negotiations, which Alex Salmond
:45:56. > :46:00.would happily not concede to us in any way whatsoever. And that is the
:46:01. > :46:05.point. And we are not arguing for independence. Territorial waters are
:46:06. > :46:09.defined as the midpoint between the outlying coastal points. If Shetland
:46:10. > :46:13.were not part of Scotland, a large part of the Scottish oil reserves
:46:14. > :46:18.would go. I am not suggesting this is what Tavish Scott is advocating
:46:19. > :46:22.or that it would be likely to happen. But it illustrates the
:46:23. > :46:31.fundamental selfishness of some of the arguments put forward for
:46:32. > :46:35.Scottish independence. They are saying, we have got this oil so we
:46:36. > :46:37.can run off and do what we like and make ourselves wealthy. Someone else
:46:38. > :46:40.could run off and make themselves wealthy. But they are carrying out
:46:41. > :46:45.negotiations already with London and Edinburgh probably to get the best
:46:46. > :46:50.deal. Yes, and we have done that over many years. It was said in the
:46:51. > :46:54.1970s that the leader of the then County Council was the only local
:46:55. > :46:58.Government leader who could walk into the Scottish Secretary's office
:46:59. > :47:01.in Whitehall and get a meeting. Funnily enough, that could be
:47:02. > :47:06.repeated in due course! All right. Thank you.
:47:07. > :47:10.Here at the Daily Politics we rarely ever stop thinking about the big
:47:11. > :47:14.questions. Where is the Higgs boson? If a tree falls in the forest and
:47:15. > :47:17.no-one is there to hear it, does it make a sound? Whatever happened to
:47:18. > :47:20.Friends Reunited? But the one that's been bothering us this week is what
:47:21. > :47:24.exactly is the output gap? Economists largely agree it's a
:47:25. > :47:27.crucial way of judging the state of the nation's economy, so we thought
:47:28. > :47:31.we'd better send Adam off for a mental work-out.
:47:32. > :47:35.Apparently this place is called a gym. And I am told it is an
:47:36. > :47:39.excellent place to explain one of the concepts for measuring the
:47:40. > :47:43.fitness of the economy. And that is the output gap, which is the
:47:44. > :47:49.difference between where the economy is now, and where it could be if it
:47:50. > :47:55.was firing on all cylinders. A bit like the gap between me and them.
:47:56. > :47:59.And this is why it matters. If the output gap is closed and the economy
:48:00. > :48:03.picks up as much pace as it possibly can, but the Government still can't
:48:04. > :48:07.raise enough revenue through things like taxes, then we have got what we
:48:08. > :48:12.call a structural deficit and the coalition has pledged to eliminate
:48:13. > :48:19.that. So the output gap is a pretty major element in any Government's
:48:20. > :48:29.economic calculations. This calculation uses this equation, and
:48:30. > :48:35.this equation. Or we can use another method. Whatever that is! Put it
:48:36. > :48:39.this way, it is tricky. Like measuring my biceps, something that
:48:40. > :48:43.does not exist in the real world. Though there are very different
:48:44. > :48:47.opinions about how big or small the output gap is, meaning people of
:48:48. > :48:50.different political persuasions can use it to sell their particular plan
:48:51. > :48:57.for getting the economy back to full health.
:48:58. > :49:00.Joining me now is the crossbench peer and biographer of John Maynard
:49:01. > :49:05.Keynes, Robert Skidelsky. Welcome. Before we get onto the output gap,
:49:06. > :49:09.do you maintain that the coalition's austerity programme was
:49:10. > :49:14.unnecessary and has done permanent damage to the economy? I do. I think
:49:15. > :49:18.the big giveaway here is the Chancellor's consistent failure to
:49:19. > :49:21.meet his Budget targets. He has failed to do that and you should
:49:22. > :49:28.have been borrowing 60 billion by this point. He is having to borrow
:49:29. > :49:33.over 100 billion and moreover having to increase the cuts to meet its
:49:34. > :49:38.revised targets by about 60 billion over the next four years. That is
:49:39. > :49:43.failure to me. The argument would be that without austerity and the plans
:49:44. > :49:47.to make some cuts, we would be in a worse situation. Of course you can
:49:48. > :49:50.always argue that but to my mind his whole strategy was based on the
:49:51. > :49:55.wrong theory of economic policy, which was that the cuts would cause
:49:56. > :50:00.the economy to grow faster than it did. That is why essentially it has
:50:01. > :50:05.not grown faster than it did and he has failed to meet his targets. What
:50:06. > :50:10.do you say to economists looking at this Budget, looking at here of
:50:11. > :50:15.austerity to come, the fact we still have a vast amount of spending cuts
:50:16. > :50:18.to go according to the Chancellor, and that he has missed his targets
:50:19. > :50:24.and we are not going to have a balancing of the books until 2018.
:50:25. > :50:27.He was wrong. Austerity has choked off demand in the way Labour said
:50:28. > :50:33.and he has not done what he promised. I don't think that is
:50:34. > :50:36.right at all. The fact is we had a huge crisis which led to an
:50:37. > :50:41.extraordinarily large annual deficit, 12% of GDP. It was not open
:50:42. > :50:46.to a Government in that situation with a deficit of that size and the
:50:47. > :51:00.national debt is exhilarating to go in for a traditional, as Robert
:51:01. > :51:04.would see it, came the solution. -- Keynsian solution. This has been a
:51:05. > :51:08.gradual process and that is why it will extend beyond the next
:51:09. > :51:12.Parliament. But the benefit is that the British economy is now
:51:13. > :51:17.recovering, despite the fact there was a huge black hole. If you want
:51:18. > :51:21.to see austerity, look at the eurozone. The cuts were real cuts.
:51:22. > :51:27.Civil servant salaries were not restricted to a 1% increase, they
:51:28. > :51:32.were actually cut. Pensions and benefits were cut. Where it has been
:51:33. > :51:37.too severe, I would argue, and I agree with Robert's analysis
:51:38. > :51:42.partially, if it is applied to the eurozone. But George Osborne has
:51:43. > :51:47.quite rightly judged it as a gradual process. You don't think you should
:51:48. > :51:52.have gone further? He got it right. Then why did he set himself those
:51:53. > :51:56.targets? It is all very well to say my approach as to be gradual because
:51:57. > :52:02.of the issues we have inherited and so on and because we know what the
:52:03. > :52:06.effect of the economy will be on to drastic measures, but then why say I
:52:07. > :52:13.will achieve these targets over this period of time when he has
:52:14. > :52:20.completely failed? He has failed to achieve them. He accepts that. That
:52:21. > :52:24.is why he lengthened the period. The major reason that the period of
:52:25. > :52:27.consolidation had to be extended out was because of the sharp
:52:28. > :52:32.deterioration in the condition of the eurozone. At the very beginning
:52:33. > :52:37.of this crisis for the first couple of years, the eurozone was saying it
:52:38. > :52:41.wouldn't affect us. The problems of America and the Anglo-Saxon world
:52:42. > :52:45.don't apply to us. Then it suddenly hit them and it has had a huge
:52:46. > :52:56.knock-on effect on our exports and economy. That is the major reason
:52:57. > :52:59.for the extension of the time period. There was no double-dip
:53:00. > :53:00.recession in the end, as was widely predicted. Triple the recessions
:53:01. > :53:05.even. Unemployment never reached those higher than predicted levels.
:53:06. > :53:10.It was not as bad as Labour said. The Budget projections were based on
:53:11. > :53:14.estimates of economic growth over 2011 and 2012, which just didn't
:53:15. > :53:20.happen. In fact we flat lined for two years. I would say that was
:53:21. > :53:25.partly the result of the austerity policy. We haven't got much time but
:53:26. > :53:29.on the output gap and spare capacity, the worry for some
:53:30. > :53:33.economists is that we are close to capacity, and in other words the
:53:34. > :53:39.structural deficit, the bit that will not disappear even if we have
:53:40. > :53:44.continued growth, is far bigger. Do you agree? The output gap concept is
:53:45. > :53:49.tricky. The Office for Budget Responsibility reckoned it was about
:53:50. > :53:55.2.2%. That is the gap between actual output and what we could be
:53:56. > :54:01.producing at full employment. I think that is tricky in this way. It
:54:02. > :54:06.is an average. I think the country doesn't have the same output gap in
:54:07. > :54:11.each part of it. In fact I think London could be overheating. The
:54:12. > :54:15.North East has a larger output gap. That poses a challenge for policy
:54:16. > :54:23.because policy is very blunt on these matters. You have a one size
:54:24. > :54:28.fits all interest rate. And you don't differentiate in fiscal policy
:54:29. > :54:32.between different regions. I think we have to rethink this. We have big
:54:33. > :54:37.output gaps in some parts of the country and zero in other parts of
:54:38. > :54:44.the country. How do we deal with that? I can't answer that but thank
:54:45. > :54:47.you for explaining it! It's said to be one of Whitehall's
:54:48. > :54:51.toughest briefs, and as Chancellor few things are more nerve-wracking
:54:52. > :54:54.than Budget day. The wife of one former Chancellor described it as a
:54:55. > :54:58.little bit like having a baby. So how do they calm their nerves? Take
:54:59. > :55:01.a look at this. As you offer the media one last photocall, they will
:55:02. > :55:04.now be assessed by what you plan to drink during your long Budget
:55:05. > :55:08.speech, the one occasion in the year when alcohol is allowed in the
:55:09. > :55:14.chamber. One of his minders had already asked Geoffrey Howe what he
:55:15. > :55:20.wanted. I say probably some gin. He said, what, neat? Thank goodness he
:55:21. > :55:26.asked the question because I would have been lolling flat over the
:55:27. > :55:30.dispatch box! I chose whiskey. The parliamentary secretary is expected
:55:31. > :55:35.to lay on the whiskey with some water. One reason was because of the
:55:36. > :55:40.Scottish whiskey association, which was one of the most persistent and
:55:41. > :55:44.attractive lobbyists of me in the run-up to every Budget. I always
:55:45. > :55:50.drank a moderate amount of lunch -- at lunch. I had the white wine
:55:51. > :55:58.spirits up. Orkney whiskey with Highland water. Water with a dash of
:55:59. > :56:03.brandy. Everybody is obsessed with what they used to drink. That was a
:56:04. > :56:07.clutch of former Chancellors ending with Nigel Lawson, Norman Lamont and
:56:08. > :56:11.Denis Healey. I am joined by Kitty Ussher, former Labour Treasury
:56:12. > :56:19.minister who now works with Tooley Street Research. Was it an enjoyable
:56:20. > :56:23.ordeal? Or just an ordeal? Something you are on autopilot for. As you
:56:24. > :56:27.deliver the speech, and maybe there is snorting and shouting here and
:56:28. > :56:33.there, you think, they didn't notice that. That didn't go down too badly.
:56:34. > :56:37.What will be the reaction to the next bit? You outside yourself,
:56:38. > :56:43.watching yourself, because you have rehearsed it so many times in your
:56:44. > :56:46.mind. A surreal experience. Will you, different circumstances. You
:56:47. > :56:53.worked for Alistair Darling when he was Chancellor just before the
:56:54. > :56:57.banking crash. What was that like? Quite intense. We had some days when
:56:58. > :57:00.we were a few hours ahead of the market and making tentative choices
:57:01. > :57:05.at the beginning of the day that were implemented by the afternoon.
:57:06. > :57:11.It was a time of extreme focus. Panic? Not quite. In Alistair
:57:12. > :57:15.Darling's memoirs he said there was one moment when he considered
:57:16. > :57:18.panicking but because he is such a stable personality, I think he was
:57:19. > :57:23.the best possible person we could have had in that place at that time.
:57:24. > :57:28.And what about the run-up to Budget day? By the day before, it is
:57:29. > :57:33.execution mode. Not everybody knows everything that will be in it but
:57:34. > :57:40.you are talking about who is ringing whom and doing what media and
:57:41. > :57:44.rehearsed -- rehearsing the speech. I suspect the Chancellor will be
:57:45. > :57:49.locked up with his closest advisers and making sure he knows his speech
:57:50. > :57:53.well enough to go into the autopilot you have described. Sometimes the
:57:54. > :57:56.most unexpected things happen. I remember on one occasion Nigel
:57:57. > :58:01.Lawson was delivering a Budget speech and there were some pages
:58:02. > :58:08.missing! He just carried on. Then suddenly one was conscious that he
:58:09. > :58:10.was ex-temporising. There was a flurry on the backbenches and
:58:11. > :58:15.suddenly from the box where the civil servants were sitting a whole
:58:16. > :58:20.lot of pieces of paper came along. The whole House cheered when he
:58:21. > :58:24.finally got them! But Nigel did a great job of ex-temporising and then
:58:25. > :58:30.returning to the script. One of the things with a Budget, you have to
:58:31. > :58:35.stick to the script. Do you? The detail on tax is being watched by
:58:36. > :58:39.accountants, lawyers, will be carried into law. You can't say this
:58:40. > :58:45.tax will be raised at 20% when it should be 15. That would not go down
:58:46. > :58:48.well. And the real deadline is the printing of the documentation, which
:58:49. > :58:53.is probably happening right now and you cannot make any decisions after
:58:54. > :58:56.that. That is it. From all of us, goodbye!