26/06/2013 Newsnight Scotland


26/06/2013

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being cut in education. Tonight on Newsnight Scotland: How

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the spending review will affect life up here. And whether any of the

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politicians can offer a plausible alternative.

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Good evening. George Osborne is offering more austerity, even into

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the first year of the next Westminster parliament, and beyond.

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But he argues that it's all worthwhile, because it's working.

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How much of this is economic realism, and how much political

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positioning? We'll hear from the politicians shortly, but first

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Andrew Black reports. Suites. Everybody loves them

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especially politicians. They come in handy when trying to keep the voters

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on site. That's why the Chancellor outlining his spending plans the

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2015 and 2016 to make he gave something back. Amid all the doom

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and gloom, yet more spending cuts. This coalition came into office with

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a commitment to address with firmness and resolve one of the

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biggest economic crises of the post-war era. The action we have

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taken together with the British people as brought the deficit down

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by a third, helped a record number of people into work and taken our

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economy back from the brink of bankruptcy. That is the vision

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anyway so what about Scotland? out today the block grants to the

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devolved administrations. Because we have prioritised health and schools

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in England this feed through the Barnett Formula to savings of around

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2% in Scotland, Wales and Northern Ireland. The Scottish resource

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budget will be set at �25.7 billion and Scotland will benefit from new

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capital borrowing powers almost �300 million. Being part of the UK means

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Scotland will see its capital spending power increased by almost

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13% in real terms in 2015 and 2016. It is right for the Scottish

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Parliament to decide how best to use it. That is devolution within a

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United Kingdom delivering to Scotland. So what does all that

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mean? Let's look at the suites first. The Chancellor says

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Scotland's capital spending allocation to build schools and

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hospitals will increase by almost 13% which is the government -- or

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cover learnt of almost �300 million. But the resource budget, the money

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used to keep Scotland ticking over in public services, will be at �25.7

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billion which is a decrease of 2% in real terms. The Scotland Office will

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have to make savings of 10% in line with cuts to other UK government

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departments. Overall, the Chancellor says his plans will cut the deficit

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and help economic recovery. But the Scottish government does not see it

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that way. The Spending Review has essentially resulted in the UK

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government applying more cuts to the Scottish government's budget in

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terms of the operating resources of the government and capital budgets.

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It compounds the reductions we've had since 2010 with our capital

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budget down by 26%. This has been about more cuts and not about

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investment. And it's not just budgets which affect Scotland.

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Changes in reserved areas also have an impact north of the border.

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George Osborne says under the circumstances he is offering

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Scotland a bitter sweet deal. His opponents say it has left a bitter

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taste. A little earlier, I spoke to the

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Scotland Office Minister of State, Conservative MP David Mundell. I put

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it to him that the Chancellor reckoned he was aiming to promote

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economic growth through massive capital investment. I think for

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Scotland it is certainly a positive statement in relation to capital

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spending. The Scottish government have been calling for additional

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capital spending. That is what they are going to get. They will have

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�3.3 billion. 400 million of it will be extra. They will have additional

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borrowing powers. These are the messages I've been getting every

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time I've come on programmes like this. They say they have programmes

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ready to go and if they had additional money they will be able

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to take them forward and now they can. More generally, you get the

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impression listening to George Osborne that this was his way of

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prompting some sort of economic growth. We'll hear tomorrow from the

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Chief Secretary to the Treasury about some detail on significant

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infrastructure projects which the government are taking forward. Many

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of which will have a positive knock-on effect in Scotland. The

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Chancellor accepts that investment in infrastructure and capital

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spending is the way to secure growth. If that is the case, can you

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explain why according to the Spending Review document today

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public sector growth capital formation will either be flat in

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2015 and 2016 or decrease by 1.7%? It is still the case that they will

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be additional funding for capital projects. That is what the

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Chancellor has made clear. Specific projects which of the government

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will bring forward will be set out tomorrow. There will be additional

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funding for capital projects available. The only reason we have

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to believe any of this and the only thing that is real is the numbers

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which you filled in in the document produced today and on page of that

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document you find that it public sector gross capital spending is

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exactly the same according to the big figure in 2015 and 2016 as it is

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in 2014 and 2015 although it is filled in as a decrease of almost

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2%, which is the opposite of everything we are being told. So in

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fact there is no extra capital spending pencilled in for 2015 and

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2016. You might not even be in government. That will be for the

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people to decide whether we have pursued the right policies in terms

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of determining what we're doing or go down the Labour root of more debt

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and more spending. There is a clear choice that has been created today

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as to where people see future spending my government. Whether they

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want the Labour model which was supposed to be announced by Edmonton

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and. -- by Ed Miliband. You are not proposing any increased capital

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spending at all in 2015 and 2016. The �50 billion figure which George

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Osborne talked about today is exactly the same as the �50 billion

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figure he talked about in his March budget. There is no extra capital

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spending whatsoever. They will be �400 million extra capital spending

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available in Scotland. -- they will be. That is in addition to the 1.3

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billion extra funds they have had since the comprehensive spending

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review. So for the Scot -- so the Scotland these are good arrangements

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which blow the Scottish government to get on with the projects they

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they have. That's -- which allow. It is time the Scottish government gets

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shovelling. We will have to leave it there. Thank you very much.

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Just before the programme, the Finance Secretary, John Swinney,

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came into our Dundee studio and I put it to him that he was about to

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get exactly what he's been demanding for years. Not exactly. We have seen

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a reduction in our capital budget of 26.6% since 2010. But you have been

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given extra powers the capital spending which no other government

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department in Britain gets anywhere near. That was what the Scotland act

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was designed to give to the Scottish Parliament and those powers will be

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used from April 2015 onwards. The challenge in terms of economic

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recovery is what we can do now to improve the economic conditions

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within Scotland. You have said in the past it is terribly unfair and

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the British Government should skew spending away from current spending

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and they have given new �400 million or the ability to borrow that

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amount. At least you've got something you want out of the

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constitutional arrangements in Britain. We welcome the fact we're

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getting borrowing powers. The point I am making is that the economic

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challenge today is about getting investment into the economy and

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build on the fact we're seeing some progress coming into economic

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recovery. We have higher employment in Scotland -- higher unemployment.

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I wanted the Chancellor to give us the immediate ability to invest more

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money in projects that would create employment within Scotland. That has

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not materialised. You would like more borrowing powers on -- and more

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capital spending powers but intellectually you agree with the

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Chancellor's strategy of deficit reduction, don't you? Since 2010 the

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Chancellor has cut too far. I accept the debt has to be repaid and we

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have to reduce the level of debt. If you look at the borrowing figures,

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the UK Chancellor is going to borrow �275 billion more than the planned

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in 2010. Not to invest in growth but to deal with the consequences of

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failure. If the Chancellor had made different decisions in 2010 and had

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invested more in capital investment we would have been able to invest

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more in employment. That argument has now been vindicated by the IMF

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and the Institute for fiscal studies. But you are not arguing

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with a reduction in your current budget. It is undesirable and I

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will... And unacceptable for budgets which are already set for this

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current financial year to have new reductions applied. That is what the

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Chancellor set out in the budget statement in March. Sometimes you

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talk about the fact you are against any cuts in public spending.

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accept we have to repay the public finances but the Chancellor cut far

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too fast and far too deeply and as a consequence he has brought on rising

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debt. Let's say people vote for independence next year. Buy you

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saying that from day one of independence they would be no

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structural deficit in the Scottish budget? If you look at the most

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recent financial information, Scotland words... Scotland would

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have been in a stronger financial position compared to the rest of the

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UK. That will give us choices about whether we want to reduce debt

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faster whether we want to put money aside for an oil fund. I am asking

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whether Scotland would have a structural deficit from day one of

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independence? There's going to be an overhang of debt that we will

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inherit from the rest of the UK. am asking you whether you would be

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in that camp? If you look at the data it shows that Scotland

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contributed 9.9% of UK revenue and we got back 9.3% of UK expenditure.

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What that demonstrates is that we are in a stronger financial position

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and able to invest in our economy. If you deliver more growth, he

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deliver more tax revenue and it allows you to run sustainable and

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effective public finances. If we don't have a structural deficit,

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with one bound we are free from all of this austerity, we can just spend

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any money we like. That is the choice that faces people in

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Scotland. The Chancellor confirmed to me that for the foreseeable

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future and Ed balls has confirmed this is that UK administrations will

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be undertaking an austerity agenda. We believe we should be investing in

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growth, in expanding the economy... What you appear to be saying...

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consequence people in Scotland can see investment in their public

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services. This idea you can just sidestep austerity altogether by

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voting for independence, your critics would say you are living in

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a fantasy. You appear to be saying that Scotland would not have a

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structural deficit, we can forget about cuts in capital spending but

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also day-to-day spending in order to answer the books. We are in a

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stronger position than the rest of the UK which allows us to design our

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public colour sees in aid different fashion. -- public policies in a

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different fashion. You will presumably have to do something

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similar to the pay policy. The pay policy has to be available...

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you going to follow George Osborne's lead? We will decide that

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in September. Will due be favourable in principle? -- would you be.

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are going through a process of public service reform, we have to

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make sure we can take public servants with us. John Swinney,

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thank you very much. I am joined from London by Labour's Shadow

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secretary, Margaret Curran. How joyful are you about your party's

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new policy of signing up to the coalition government's public

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spending limits? I think we have seen from John Swinney's interviews

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exactly what the differences between us and the other parties. There is a

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big contradiction between what he is saying and what he is being honest

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about. We are being honest and we think the government should change

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course immediately, we should stimulate the economy with different

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approaches and we could avoid perhaps some of the challenges of

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the future. We need to look at trying to single out the economy,

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increased tax revenues, get growth back into the economy, that would be

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much better but we have said to people honestly, if the government

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continues as it is we will inherit a very stringent financial situation

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and that needs be addressed. Rather than hiding things like John Swinney

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has, when he denies what the realities are, we don't want to do

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that, we want an honest conversation and we want to be realistic but say

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there is an alternative and we can offer hope. I am even more confused

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now. You sign up to these constraints for a year or you don't.

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You don't have to do that. The coalition government had a budget

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and it threw out most of what Alistair Darling had planned, it is

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possible for you to see the same. We think the coalition government is so

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wrongheaded that if we win the next general election we will have an

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emergency budget, get rid of the austerity nonsense and have an Ed

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Miliband/ Ed balls programme for the future. The government said they

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would get growth going and it's stalled. They said they would get

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spending under control but it has gone up. -- borrowing under control.

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We have to recognise the government are not solving the economic

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programmes, the overhang from the financial crisis, and we have to

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face that fact. We have to look into the future about how we are going to

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sort out the finances, we have to make public finances work more

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effectively and get the balance right. That is a more credible

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approach and I think it is the approach the modern times to get the

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economy growing and offer opportunities for families and young

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people going forward. Everything you have said is vacuous. You haven't

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told us a single thing that Labour would do that the coalition

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government is not doing. Ed Miliband made a speech the other week about

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spending into the future and I think all credible economists will say

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that if you project public expenditures into the next years you

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need to take a serious look at welfare spending. Anybody who denies

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that is not living in the real world. You support a welfare cap?

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Would you include pensioners? very long-term yes, that has to be

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done. In the first few years we don't think it does. In the longer

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term, as a country we have to come to terms with the balance of public

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finance. What we are seeing from this government, who are not

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concerned about the future, just about a political debate about

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spending in the future... We could stimulate the economy. George

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Osborne's point is that you can't have a situation where you need to

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start cutting the old-age pension because more people are claiming

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benefits. I don't think that is the framework that is right. We are

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saying in the longer term we need to look at the exponential rise because

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people are living longer, thankfully, and the balance is even

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