03/10/2011 Newsnight


03/10/2011

In-depth news analysis with Jeremy Paxman. George Osborne says there will be no deviation from his deficit reduction plan. Will it be enough to get the economy back on track?


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Transcript


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Hello from Manchester. Scene of the annual gathering of the dominant

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part of our Government. Some hours ago, the Chancellor of the

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Exchequer, stood up, in this hall, and told us how he's hoping to save

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the economy. He mentioned a technique to help business, but

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even his own ministers found it hard to explain exactly what it was.

:00:25.:00:29.

This cabinet minister understands credit easing, as doubtless, do

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almost all of these 80-odd Tory members, they may even agree what

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it is, they certainly don't agree on Europe. Neither does this man,

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who might have been leader of the party, and this eminent Liberal

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Democrat, who is here to put the Euro-sceptics right, mix in a

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couple of irritating commentators and we ought to have the makings of

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:00:57.:01:02.

We are not emphatically not to call the main scheme to boost the

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economy by the Chancellor today, a dodge, a wheeze, a bit of creative

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accounting, or indeed charge on the taxpayer. When he announced he was

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introducing called credit easing, even the Chancellor's own ministers

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hadn't a clear idea what he was talking about. David Grossman will

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explain it all in a moment. The prevailing tone of the Chancellor's

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speech to the 4,000 though members of his party here was somber, or

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calling a spade a spade, dull. Dull, because he didn't have much to say.

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This is no time for gagsters. Here is David Grossman with everything

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you ever wanted to know about credit easing.

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There is not so much good news to be had on the economy right now.

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The black hole of the debt crisis sits on top of the conference like

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a, black hole. Many would cheer to the rafter on things like more

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defence spending and tax cuts, but they have all been lost into the

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spinning more. But the ministers are keen that the electoral chances

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don't follow them into the abyss, so out of the back hole a little

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light emerged. To adapt PDWodehouse there is a comparison between a

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Chancellor with a a hole to fill and a ray of sunshine. The doom and

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gloom thing isn't playing well, but they don't want to give up the idea

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that they will rip up the deficit strategy. What to do, not so much

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plan B, as plan, be a bit more cheerful.

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Ladies and gentlemen, please welcome the Chancellor of the

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Exchequer, George Osborne. George Osborne gave his party a

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flash of the smile that has been absent from his speeches in recent

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years, as well as some encouraging words. I don't want anyone to

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underestimate the gravity of the situation facing the world economy.

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

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

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

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worse. This being a party conference, the Chancellor's

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starting point was a pop at the Labour Party. In the process, a pop

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at one of his cabinet colleagues as well. Economic adviser to Gordon

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Brown, I'm not sure I would put that on my CV if I was Ed Balls.

:03:49.:03:59.
:03:59.:03:59.

It's like personal trainer to Eric Pickles! Claim - The Chancellor

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wasn't just giving out smiles and gags too, there was money too, �805

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million to pay for a council tax freeze in England only. �145

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million on new infrastructure, like spreading mobile phone coverage,

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and �50 million for research. All to be paid for by using money

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unspent from existing budgets. But this was definitely not Mr Osborne

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relaxing his fiscal grip. The overall spending will stay the same.

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Not only Labour, but some Conservatives as well, want a

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change to. That they want tax cuts, especially for businesses. Don't

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think I haven't thought hard about what more we could do, that I don't

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explore every single option. I do. But borrowing too much is the cause

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of Britain's problems, not the solution.

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APPLAUSE But perhaps the most significant

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thing the Chancellor did today was to introduce us to a new bit of

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economic jargon. I have set the Treasury to work on ways to inject

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

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business. It's known as credit easing.

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In short, this means the Treasury lending money to businesses, even

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if the banks won't. Is there a problem with this, we did have

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Project Merlin which was supposed to get lending going to businesses?

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If that was working, if Project Merlin was working really

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effectively, you might think there wasn't a great need for Government

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support to businesses. It may be, and there probably is the case that

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there are businesses out there that can't get money from banks. There

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are two sorts, one sorts where Government, or whoever lends them

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will make money because they are viable enterprise, and others not

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getting money for good reason, which is they couldn't pay it back.

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How has the speech gone down. At the weekend this senior

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Conservative MP described the Government's long-term economic

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policy as "inconsistent and incoherent". Today, well he was

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full of praise for the Chancellor. I'm greatly encouraged by the

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speech. Particularly the emphasis on making sure we protect people's

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living standards. A relentless drive to secure growth in the

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economy. But what's this? If we rewind the

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tape, we see this positive take followed a lengthy chat with Steve

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Hilton, the Prime Minister's head of strategy. Evidence, according to

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some, of a bit of political nobbling. However, if we rewind the

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tape even further, we can see that Steve Hilton, with three other

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senior Number Ten insiders, just happened past the site of the

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interview, it was the MP who wanted the chat. Steve, one point. Let's

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go in there. However, if Steve Hilton will have to put his arm

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around every critic of the Government's economic policy, well,

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he will be a very busy man. With us now is the Transport

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Secretary, Philip Hammond. Now this credit easing, how much money is

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involved? We don't know yet, there is not a fixed limit. You don't

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know? The Chancellor hasn't set a fixed limit. He has asked the

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Treasury to look at the ways in which the Treasury could use its

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balance sheet, to deliver credit directly to the parts of the

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economy that need it, and then we will estimate the quantity of

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demand for that kind of credit. much money might be available for

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it? It could be billions of pounds. How many billions, roughly? This

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isn't a totally new idea as suggested by David in the tape.

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you haven't had time to work it out? In opposition we talked about

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a national loan guarantee scheme, it is designed to do the same thing,

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get money to the parts of the economy that aren't been reached, a

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few tens of billions of pounds if that was the demand. When there l

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it be available? The Chancellor has tasked the Treasury with looking

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for the openings for delivering the credit easing. It is likely there

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will be different types of approach, that are appropriate for different

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types of business. So mid--cap businesses, which could act. What

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does a mid-cap business? Middle- sized companies. Companies

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employing 200-300 people, could be cable to access a bond mark. That

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could be done relatively quickly. Packaging up much smaller loans to

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smaller businesses may take a bit longer. Does this appear on the

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Government's books? If the Government uses its balance sheet

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to lend to businesses through credit easing, it wouldn't add to

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the deficit, because the Government would be buying liquid financial

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instruments in exchange. Is it similar to PFI or other wheezes

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used by the previous Government? is similar to what the Bank of

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England is doing to the quantitative easing, it is buying

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Government debt, this would be something that got credit directly

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through to private sector business that is couldn't get credit from

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the banking system. So it is an admission that project

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merllirn, the scheme to get banks to - Project Merlin, the scheme to

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get banks to lend to businesses has failed? It hasn't failed. In the

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first half of the year the banks have met their target for lending

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to small and medium enterprises. that case you set the target too

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small? The target for the banks was set to what they could deliver on

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the basis of the balance sheets they have. There is clearly more

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demand in the economy for credit than the banking system, crippled

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as it is. Than you realise? No, the banking system, because of the

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problems we have been through is able to meet. You were talking

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about this ages ago, you knew Project Merlin would not be enough?

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No, we were talking about a national loan guarantee scheme in

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opposition, as way of adding to the lending the banks could get through,

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to small and medium-sized businesses. This monetary activism,

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that the Chancellor is talking about, is that another, what he

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called, Ponzi scheme? Not at all. You could describe this as a form

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of monetary activism. What the Chancellor is keen to emphasise is

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we are not going to back down or compromise in any way, our

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commitment to closing the fiscal deficit. Eliminating the structural

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fiscal deficit over the life of this parliament. That doesn't mean

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we are powerless to act to hp business and stimulate growth. We

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can do that through monetary activism, making sure interest

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rates remain low and credit gets through to the economy. Some

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people's brains will short circuit at the moment about what is on and

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off the Government books. Is it accurate, that if you start

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investing in these small or medium enterprise companies, and they go

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belly-up, the taxpayer is exposed to the loss is that right? It is

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true that the Government would put its balance sheet at risk during

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the exercise, that is the point of the exercise. The risk has to be

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properly priced by an independent credit rating institution. Who will

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make the decision? In terms of lending, it depends on the conduit.

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If it is bonds purchased in the market they are bonds done in the

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usual way, by bond credit agencies. If it is packages of small business

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loans packaged together for the purpose, it will probably be the

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banks who have the existing relationships with those businesses

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who are charged with making the credit and lending decision. So the

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Government, and therefore the taxpayer, could lose money on this?

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Well, there is a contingent liability, but that will be priced

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for. This will not be free money. That is a way of saying yes, a

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contingent liability? That means there is a risk, of course there is

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a risk. But nobody is suggesting that there is no risk. But what we

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believe is that given the demand for credit in the economy, the

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urgent need to support small and medium-sized businesses, this is a

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risk that the Government should be prepared to take, provided it is

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properly priced and managed. Just on the broader question of how

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this party now looks to you today. A lot of people are saying this

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looks a very different kind of Tory Party to the Tory Party we were

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familiar with. Do you think it's different? No, I don't think so. If

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you are talking about credit easing this is the direct descentant of

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the national loan guarantee system. I mean the people here, and how

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they greeted George Osborne's economic strategy today, the sort

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of things they are worried about. Does it seem to you a different

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Tory Party? The party has clearly changed over the six years since

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David Cameron took the leadership. It has become younger, more diverse,

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and we're all believing that is a good thing. It has changed? Over

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the last six years, definitely. Let's go to some of the audience

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now. Let's start off with George Osborne, who is excited by credit

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easing? Three people were, four people were. Very good, you in the

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front row, go on. As an 18-year-old, I'm extremely worried by the

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structural deficit we have inherited from Labour, and

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therefore, a scheme that is a value waited risk, that will put money

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into businesses to deliver jobs and growth, has to be a good thing for

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my future and this country. Are you an economist? I did an economics A-

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level last summer. That is good enough in this Government, I

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imagine! All right, you are slightly more qualified. The lady

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at the back there, very hard to see you in the darkness. I'm a local

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councillor in Bedford, I'm really pleased that more money will come

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into local Government. Do you feel the fact the Chancellor had to

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announce this, is an indication that what has been advocated

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previously, the Project Merlin, to get the banks, allegedly, to lend,

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has succeeded or failed? pleased he has identified there is

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an extended need for small businesses to get money. I'm

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pleased he has identified that we need in local Government more money.

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That's terrific. Lady in the second row with your

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hand up? I have been working with a start-up company, and they have

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been to over 90 different avenues to get credit. This is a small-

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smedum enterprise, it is British, they can't - small-medium

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enterprise, it is British, they can't get credit. Anything for them

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I'm for. All you Tories, what you really want is tax cuts? Yes.

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Anyone not want tax cuts right now? Does anybody disappointed. You can

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have your say in a minute. Was anybody disappointed the Chancellor

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didn't say anything about tax cuts today? You're all very loyal! Go on

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then, Philip? We all want tax cuts when it is affordable. We are a

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tax-cutting party. We believe that lower taxes are the way to

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stimulate enterprise and get the economy growing. But we also know

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that we have an immediate challenge in getting rid of the deficit we

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have inherited from Labour. The Chancellor's policy was endorsed

:15:19.:15:28.

today by SMP, reaffirming, the ratings agency. Who have such a

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dodgy record. They reaffirmed Britain's Triple A credit rating,

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means people can go on looking forward to low cost interest rates

:15:36.:15:40.

and borrowing, and the Government can borrow at German rates of

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interest, even though we have a Greek level of debt. Going back to

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earlier, talking about how much this party has changed. Here we

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have about what, 80 Conservatives, and there is not one of them wants

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a tax cut now. That is a mark of how it has changed? This is

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responsible Government. Every one of these people. They are not in

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Government. Would like to see tax cuts when it is affordable and

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sustainable. The boy with the economics A-level is nodding his

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head! As the Chancellor said we don't want tax cuts for Christmas,

:16:11.:16:16.

Ed Balls side, that have to be reversed 18 months or a year later.

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APPLAUSE. I tell you what their loyalty hasn't changed, has it!

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Let's fix the deficit w when we can - And when we can afford it, let's

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treat ourselves to a tax cut. love that dare not speak its name

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inside the conference hall is, wait for it, Europe. With the euro

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threatening to plunge the economy into intensive care, it is all over

:16:46.:16:49.

the fringe meetings like a nasty rash. The state of the single

:16:49.:16:53.

currency has made plain the extent to which anxiety over membership of

:16:53.:16:56.

the project has not been eradicated from the party's nervous system, it

:16:56.:17:02.

has just been dormant. There was a crisis in the eurozone, and can be

:17:02.:17:06.

seen on the streets of Greece. But the reverbations are being felt

:17:06.:17:10.

back here in Britain. The Chancellor is leaving the

:17:10.:17:13.

Conservative conference early to meet the EU finance ministers

:17:13.:17:16.

tomorrow. The eurozone needs to end all the speculation, decide what

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they are going to do with Greece, and then stick to that decision.

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APPLAUSE Britain is not immune to all this

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instability. And he could have said, neither is his own political party.

:17:34.:17:38.

In recent years the Conservatives have been relatively united on

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Europe, putting aside those divisions that characterised the

:17:42.:17:47.

last period in office. Now new divisions are opening up, over how

:17:47.:17:51.

to prevent a Greek tragedy turning into a bigger drama for Britain.

:17:51.:17:55.

And a rather bizarre venue has been chosen to hold some of those

:17:55.:18:00.

discussions. And, this is no jo, these Conservatives have come to

:18:00.:18:06.

take advice from a foreigner. A leader of an increasingly Euro-

:18:06.:18:09.

sceptic party in Finland, and doesn't see the current bailout of

:18:09.:18:14.

Greece as a laughing matter. He favours a referendum on EU

:18:15.:18:20.

membership. I wouldn't know know what I would want if I was British.

:18:20.:18:26.

What would you vote? No, get out. Only a handful of MPs believe the

:18:26.:18:30.

current crisis is the perfect time to hold a referendum on EU

:18:30.:18:40.
:18:40.:18:41.

The Foreign Secretary wasn't exactly rushing to respond to this,

:18:41.:18:46.

when invited by Newsnight. How are you doing.

:18:46.:18:48.

I'll give interviews at the scheduled time, thank you.

:18:49.:18:55.

Some MPs take up slightly more subtle approaches, they want to

:18:55.:18:57.

renegotiation the relationship with Europe, then put the question to

:18:57.:19:01.

the people. People feel we get a lousy deal with Europe, some people

:19:01.:19:05.

want to renegotiate the deal in a fundamental way, some people say

:19:05.:19:11.

why bother, just get out. I'm happy to support a referendum, but I

:19:11.:19:14.

would like our Government to engage in a renegotiation. It would be

:19:14.:19:18.

better to say to the European partners, there are terms we would

:19:18.:19:22.

consider saying, we would need the permission of the British people,

:19:22.:19:28.

negotiate the terms and ask the people. By far those on the

:19:28.:19:35.

backbenches believe the current environment provides the chance to

:19:35.:19:40.

rewrite history, without the need of a vote. Talk of referendums is

:19:40.:19:44.

premature, and a distraction from the important thing, what do we

:19:44.:19:48.

want the European Union to do in the 21st century. We have to do the

:19:48.:19:52.

heavy lifting and ask how do we take powers back in employment

:19:52.:19:55.

policy, social policy, health and safety policy. What do we need to

:19:55.:20:01.

do to get there. And, when we finally did catch up

:20:01.:20:03.

with a more talkive Foreign Secretary, seemed to be suggesting

:20:04.:20:08.

he was a prisoner of a coalition, longing to be free.

:20:08.:20:14.

I do think the European Union has too much power. We set out in our

:20:14.:20:17.

manifesto, if there had been an entirely Conservative Government,

:20:17.:20:21.

some of the areas that the, the Prime Minister areas, in which we

:20:22.:20:26.

believe it has - prime areas, in which we believe it has too much

:20:26.:20:29.

power. I don't believe it is up to the European Union to set the

:20:29.:20:33.

working hours of junior doctors in the hospital in my constituency. I

:20:34.:20:35.

don't think that has anything interest there.

:20:35.:20:39.

There may be no change at all when Britain's relationship with the EU,

:20:40.:20:42.

the great fear of many Conservatives is the influence of

:20:42.:20:46.

the Liberal Democrats will mean an opportunity for reform will be lost.

:20:46.:20:49.

I think they are doing too much wagging of the dog f that's what

:20:49.:20:54.

you mean. I think we ought to show a bit more leadership. And he had

:20:54.:20:57.

this message for the Foreign Secretary. I would say to William,

:20:57.:21:01.

listen to the views of the party. They elect us, they select us, they

:21:01.:21:05.

support us. It's about time we listened to them a little more.

:21:05.:21:08.

Chancellor wants to see greater stability in the eurozone, to help

:21:08.:21:13.

the world economy. That, in turn, may also help quell demands from

:21:13.:21:16.

party activist, for a more radical transformation in Britain's

:21:16.:21:23.

relationship with the rest of the Philip Hammond is still here, we

:21:24.:21:28.

have been joined by the Liberal Democrat MP, Don Foster, here in

:21:28.:21:32.

Manchester, making a film for a programme called The Daily Politics,

:21:32.:21:35.

and by David Davis, the former shadow Home Secretary, who has

:21:36.:21:41.

edited a book out today, that sets out the future of Conservatism.

:21:41.:21:44.

Philip Hammond, I know you have to go in a second or two. But quite

:21:44.:21:47.

clearly the vast majority of your party want to have a referendum,

:21:47.:21:51.

why can't they have it? Well, I think the pressing issue, at the

:21:51.:21:56.

moment, is to stablise the situation in the eurozone. We do

:21:56.:22:01.

50% of your trade with the EU, 40% of our trade with the eurozone, and

:22:01.:22:05.

the immediate threat to Britain's prosperity and British jobs is from

:22:05.:22:10.

the on going crisis in the eurozone. Let's focus on the big issues.

:22:11.:22:15.

Nobody is saying let's have a referendum in the next few weeks,

:22:15.:22:18.

nobody is suggesting it in that time frame. Why not promise them

:22:18.:22:22.

one next year? In the long-term, what most people in this country

:22:22.:22:25.

want to see is a rebalancing of our relationship with the European

:22:25.:22:28.

Union. They want to see a guarantee that more powers will not be

:22:28.:22:33.

transferred, we have given that guarantee. And they want to see,

:22:33.:22:37.

eventually, repatriation of powers over areas like employment law,

:22:37.:22:42.

social policy. Those are the things that actually matter. Completing

:22:42.:22:46.

the single market, making sure that we can continue to benefit from

:22:46.:22:49.

free trade with Europe is the key issue. Clearly it matters to large

:22:49.:22:51.

numbers of your members, it even matters to the Liberal Democrats.

:22:51.:22:56.

The Liberal Democrats at one point, recently, wanted a referendum on

:22:56.:23:00.

membership of the euro, and the European Union. Your own

:23:00.:23:04.

backbenchers want it, why are you flying in the face of all of them?

:23:04.:23:09.

My own personal is the immediate pressing issue is to deal with the

:23:09.:23:13.

challenges the economy faces. have said all that, it is not next

:23:13.:23:16.

week. We have to see the eurozone stablising and progress on

:23:16.:23:20.

completing the single market, so Britain can get the maximum

:23:20.:23:25.

possible benefit from its membership of the EU. Let's focus

:23:25.:23:29.

on those things that deliver practical benefit to people in this

:23:29.:23:32.

country. Once we have focused on them. Then can they have a

:23:32.:23:36.

referendum? Well, these things are for the future. I think we should

:23:36.:23:40.

focus on the immediate challenges. Why are you so wriggley on it?

:23:40.:23:44.

Because I think this is not the moment to be standing back and

:23:44.:23:47.

looking at this very long-term. doesn't have to be this moment t

:23:47.:23:51.

could be next year or the year after? I think we need to focus on

:23:51.:23:55.

the real need for our own interest, to stablise what is going on in the

:23:55.:24:02.

eurozone. Chaos in the eurozone will cost jobs in Britain.

:24:03.:24:06.

Let's ask one or two members of the audience, how many of you, just a

:24:06.:24:10.

show of hands, how many of you would like to a referendum in

:24:10.:24:18.

Europe, in or out? What is that, you are impartial, you two tell us

:24:18.:24:22.

you are on different sides of the face, I would say that is about 50-

:24:22.:24:25.

50. It is not a representative audience at all, it is entirely

:24:25.:24:29.

arbitary, because these people have nothing else to do at this time of

:24:29.:24:34.

night! One of you who had your hand up, why is it that, do you think,

:24:34.:24:38.

how long can they hold the line on not giving you a referendum?

:24:39.:24:43.

wants a referendum, put your hand up again? You in the front row.

:24:43.:24:51.

What do you feel about being denied the referendum? I really do believe

:24:51.:24:54.

that we were promised a referendum, I believe. I think it would be

:24:54.:24:58.

beneficial for the country to have it and then the question could be

:24:58.:25:02.

put to rest. We would know one way or the other the will of the people.

:25:02.:25:06.

Do you understand why you are not getting one? Not really, no.

:25:06.:25:10.

Anyone else, who else wants a referendum, you in the front row?

:25:10.:25:14.

think the French dumb is very important for the UK. I would also

:25:14.:25:23.

like to say on referendums, a message to his High Excellency Alex

:25:23.:25:28.

Salmond in Scotland, that this is the only referendum that really

:25:28.:25:31.

matters. Right at the back there? think it is something that affects

:25:31.:25:36.

every single person in the UK, we should be able to have a say on it.

:25:36.:25:40.

Do you accept it is not a good time do it? Not now, but we could have

:25:40.:25:44.

one in a few years, at least say it is a possibility, rather than not

:25:44.:25:48.

answering the question at all. you unhappy not being given one?

:25:48.:25:52.

One of the reasons I lost trust with Labour is we were promised it

:25:52.:25:57.

and it was taken away. I really hope it doesn't happen again.

:25:57.:26:01.

Don Foster, you campaigned on the promise of a referendum, didn't

:26:01.:26:07.

you? Yeah. And they haven't got it? Well, what we said and what I still

:26:07.:26:12.

believe is we should have a referendum when there is any

:26:12.:26:14.

significant change in the relationship between this country

:26:15.:26:19.

and the rest of Europe. I also believe that referendum shouldn't

:26:19.:26:22.

just be about whether people accept the change, but it should be the

:26:22.:26:25.

opportunity to have a straight forward, in-out referendum, which

:26:25.:26:30.

very many people in this country do want to have, and very many people

:26:30.:26:33.

who are particularly younger people, have never had an opportunity to

:26:33.:26:37.

have a say in that particular issue. So when we have a change, in the

:26:38.:26:42.

relationship, that is the time to have it. Just for the avoidance of

:26:42.:26:46.

doubt who among you feel there ought to be a referendum? I would

:26:46.:26:52.

vote definitely for. More power to Europe? It is not, no, no, come on,

:26:52.:26:59.

Jeremy. You are trying to wind everybody up. Philip has already

:26:59.:27:03.

given us the figures. 50% of our trade is with the European Union.

:27:03.:27:09.

That is no reason to let them run our lives? �200 billion worth of

:27:09.:27:14.

trade. 3.5 million jobs in this country are dependant on our

:27:14.:27:17.

relationship with the European Union. Do you think it is

:27:17.:27:22.

legitimate to deny people a referendum indefinitely?

:27:22.:27:26.

indefinitely. We will have in the next coming years huge

:27:26.:27:30.

transformations in the eurozone. The euro corrections will be

:27:30.:27:35.

enormous, whether we will see a more federal or fiscal Europe is

:27:35.:27:39.

coming. It is fair to say to people, what sort of relationship will you

:27:39.:27:45.

have, I'm not as Euro-sceptic as my friend her, not necessarily in-out,

:27:45.:27:49.

do you want a trading relationship or political relationship. That is

:27:49.:27:54.

a fair thing to put to them. Euro-sceptic is David Cameron, he

:27:54.:27:58.

has used the words himself, is he sceptical about Europe? He is

:27:58.:28:01.

sceptical, I have known him 20 years and throughout that time he

:28:01.:28:06.

has been Euro-sceptic. But he is in a coalition, he has to be leader

:28:06.:28:12.

and diplomat at the same time. he imprisoned by people like Don

:28:12.:28:15.

Foster? Imprisoned it a little strong, he's shackled to them!

:28:15.:28:20.

David Cameron knows, not only the trade benefit, but he also knows we

:28:20.:28:24.

can't tackle things like pollution problems, international crime, all

:28:24.:28:27.

those sorts of issues, we need to work together. Some people will say

:28:27.:28:31.

the way we are doing it needs to be reconfigured. I would accept that's

:28:31.:28:34.

why we have to have further discussions. Put him right?

:28:34.:28:39.

Illusion problems, sure, there are international pollution problems we

:28:39.:28:42.

need treaties over. International crime, I don't think there is much

:28:42.:28:47.

use out of Europe on international crime. Most of the effects of the

:28:47.:28:51.

European Arrest Warrant have been to have miscarriages of justice and

:28:51.:28:55.

use up police time unnessly there are lots of other areas -

:28:55.:28:58.

unnecessarily. There are lots of other areas I don't think Europe

:28:58.:29:03.

should have a say. Why should they dictate how long a junior doctor

:29:03.:29:06.

works, what has that to do with Brussels? That is surely why many

:29:06.:29:09.

people want a discussion about the nature of the relationship, then if

:29:09.:29:14.

it changes, that is when you have the referendum. You certainly don't

:29:14.:29:18.

do it now? We're not talking tomorrow, in the next couple of

:29:18.:29:21.

years. Let's sort out the current crisis we have got, that is the

:29:21.:29:26.

most important thing. If you had your way we would have been in the

:29:26.:29:30.

euro, wouldn't we? We said we would have gone in if the conditions were

:29:30.:29:35.

right, they were not right. That is what we said, that was the facts,

:29:35.:29:38.

come on. How much of the audience are

:29:39.:29:43.

persuaded by the protestations of Mr Foster here, his good intentions

:29:43.:29:51.

on the euro? None of you believe him? Why don't you believe him, he

:29:51.:29:59.

seems a trustworthy chap? Well there we are.

:29:59.:30:04.

Do you feel, David Davis, that what you could do in Government on

:30:04.:30:07.

Europe is actually circumscribed by the fact that the Liberal Democrats

:30:07.:30:12.

are in Government with you? course it is, that's, a coalition.

:30:12.:30:16.

Do you resent that? No, I approve of the coalition. It is better than

:30:16.:30:19.

the alternative, if you wanted Gordon Brown sitting here.

:30:19.:30:24.

APPLAUSE The simple truth is. We found

:30:24.:30:29.

something the audience aproves of! The simple truth is there are

:30:29.:30:32.

compromises on both sides. There are things the liberals are having

:30:32.:30:37.

to do I'm sure they don't like. We have to compromise with them. If

:30:37.:30:41.

this was a Tory-only Government, we would be much more robust on Europe,

:30:41.:30:46.

and rightly so. We will talk about some of this in a moment or two,

:30:46.:30:52.

who can forget Theresa May, now Home Secretary, talking about how

:30:52.:30:55.

many people thought of the Tories as the nasty party. They are not

:30:56.:30:59.

being nasty any longer about their coalition partners, the Liberal

:30:59.:31:03.

Democrats, as you have seen, the people they were calling feckless

:31:03.:31:06.

and unfit for Government only 18 months ago. That is in contrast to

:31:06.:31:09.

the talk at the Liberal Democrats own conference, where they spent

:31:09.:31:13.

much 6 their time talking about how left of their own devices,

:31:13.:31:18.

Conservatives would be sending small children up chimneys. Liberal

:31:18.:31:21.

Democrat ministers are the guarantors of fairness in a

:31:21.:31:25.

Government that would be an absolute nightmare without them.

:31:25.:31:31.

warning to the Conservative right here, we need no Tea Party tendency

:31:31.:31:35.

in Britain. In Government, yes, it means

:31:35.:31:39.

sometimes we have to be a bit awkward. As our coalition partners

:31:39.:31:44.

are finding out on a daily basis. Nick Clegg stuck with our

:31:44.:31:49.

agreements all the same. And we should always have the generosity

:31:49.:31:52.

of spirit to recognise the contribution he makes to turning

:31:52.:32:01.

this country around. Unfortunately, unlike today, in

:32:01.:32:04.

their long battle, our predecessors did not always have the good

:32:04.:32:10.

fortune of being supported by the liberals. Well, Don Foster and

:32:10.:32:14.

David Davis are still with us, why are you so ungracious? I don't

:32:14.:32:18.

think we are. There was some jokes. These people gave you your first

:32:18.:32:22.

chance in Government for 70 years, and all we saw at the Liberal

:32:22.:32:26.

Democrats conference was a lot of people being beastly about the

:32:26.:32:29.

Conservatives? Two things I would say, the first thing I would say, I

:32:29.:32:32.

don't think we were being beastly. I told some jokes at the conference

:32:32.:32:35.

about Tories, but I also told them about Liberal Democrats. There were

:32:35.:32:41.

more about the Liberal Democrats. An equality of beastliness!

:32:41.:32:44.

second thing is, the Tory Party didn't give us our opportunity to

:32:44.:32:51.

be in Government, the public decided that no one party should be

:32:51.:32:54.

in overall control of this party. We looked as a possible deal with

:32:54.:32:58.

the Labour Party, that didn't work, they didn't want it any way. For

:32:58.:33:01.

the sake of the country we came together. As David Davis

:33:01.:33:05.

acknowledges, and the vast majority of the people at the conference

:33:05.:33:07.

have acknowledged, that the two parties coming together has been in

:33:07.:33:11.

the public interest, it is actually working. Both parties are having to

:33:11.:33:14.

make compromises. Look at the problem we had over tuition fees,

:33:14.:33:19.

or the problem we are facing with the issue of for instance, police

:33:19.:33:22.

commissioners, which we are not particularly happy with, and we are

:33:22.:33:25.

accepting it as part of the deal. Both parties have made compromises

:33:25.:33:29.

for the sake of the country. Apart from keeping Gordon Brown out of

:33:29.:33:32.

Government what have the Liberal Democrats given you? Well, the

:33:32.:33:40.

votes to stay in Government! Look, there are...What Has the presence

:33:40.:33:44.

in Government given you? Some of it has been a liberal tendency. Sadly,

:33:44.:33:47.

I say they haven't been strong enough in some of their liberal

:33:48.:33:53.

tendencies. Sometimes I'm the most liberal person on the Tory benches.

:33:53.:33:57.

Crikey! The simple truth is we all have to make compromises. What you

:33:57.:34:00.

are seeing in the liberal conference is fear, fear of

:34:00.:34:03.

political extinction. Fear of what's been happening to them in

:34:03.:34:06.

local Government elections. They want to distance themselves and

:34:06.:34:10.

create a political difference. That is what's going on there. I'm

:34:10.:34:14.

afraid I wise crack on occasions that the liberals have the best

:34:14.:34:18.

seats on the aircraft but no parachutes. That is it, they feel

:34:18.:34:21.

trapped sometimes. You see people like people like Tim Farron being

:34:21.:34:24.

rude about Tories. It is no surprise, we can take it, we don't

:34:24.:34:28.

need to be rude back. We need a proper debate about what the

:34:28.:34:33.

coalition should be doing. I would be interested to hear from the

:34:33.:34:36.

audience here. What do you think the Lib Dems, leaving aside the

:34:36.:34:38.

possibility of a Labour Government or continued Labour Government,

:34:38.:34:42.

that aside, what has the presence of Liberal Democrats in a coalition

:34:42.:34:49.

Government given you guys? Can anybody think of it? Somebody has

:34:49.:34:53.

shouted not much. Can anybody think of anything positive? One hand gone

:34:53.:34:57.

up there, in the green shirt? they have done what they said. In

:34:57.:35:01.

the national interest hef come together with us, to help - they

:35:01.:35:06.

have come together with us, to form a Government, we have been able to

:35:06.:35:10.

put forward many of our manifesto commitments that we wouldn't have

:35:10.:35:13.

done in a minority Government. I'm pleased about that. Some of the tax

:35:13.:35:18.

policies aren't too bad, taking people earning less than �10,000

:35:18.:35:21.

out of the tax system completely is very effective, something we should

:35:21.:35:26.

have thought of ourselves. What do you think you could have done if

:35:26.:35:30.

you had an unfettered, free hand, anybody with any suggestions. What

:35:30.:35:33.

about the Human Rights Act, for example? They have stuck you with

:35:33.:35:43.
:35:43.:35:44.

that? You're all happy about that? Right at the back? I think one

:35:44.:35:48.

issue that troubles me is the renewable agenda coming from the

:35:48.:35:50.

Liberal Democrats is not necessarily economically viable,

:35:50.:35:54.

that was something George Osborne raised today. Our renewable agenda

:35:54.:35:58.

is important, we must get it right, but not to the detriment of

:35:58.:36:02.

economic benefit of the country. We can't go bankrupt because we must

:36:02.:36:06.

have wind turbines, we wouldn't have that if we didn't have

:36:06.:36:12.

liberals in the department. other points? This point that, take

:36:12.:36:17.

the green agenda there, and George Osborne said today that we were

:36:17.:36:20.

promising, David Cameron was promising we would be the most

:36:20.:36:23.

green Government in Europe. George Osborne says this is nuts, we will

:36:23.:36:26.

go at the pace of every other country in Europe, are you days

:36:26.:36:31.

poifrpbted by that as a Liberal Democrat? - disappointed by that as

:36:31.:36:37.

a Liberal Democrat? I am glaed you raised that. I think everybody has

:36:37.:36:40.

to come together to take action. Some of the things the coalition

:36:40.:36:43.

Government has announced that came from Liberal Democrats, for

:36:43.:36:47.

instance the green deal, insulating far more homes, afterall, our homes

:36:48.:36:52.

give off more energy, waste more energy, than in Scandinavia. The

:36:52.:36:57.

temperatures are much lower in Scandinavia. We will create 100,000

:36:57.:37:01.

jobs to get our homes insulated. Nobody would disagree with that.

:37:01.:37:06.

Very few people would disagree with the world's first, the Green

:37:06.:37:12.

Investment Bank, that will actually have �3 billion to invest in

:37:12.:37:17.

British industries, creating renewable technologies, produce

:37:17.:37:21.

turbines in some ports that are no longer building ships. I suspect

:37:21.:37:26.

very few people disagree with that. That has told you! It is

:37:26.:37:29.

interesting looking at this audience, they don't seem to me to

:37:29.:37:33.

have profound. There are some significant policy differences, but

:37:33.:37:37.

there is not a profound agravation at the presence of a restraining

:37:37.:37:41.

influence on Government, on both sides. The same was true at the

:37:41.:37:44.

Liberal Democrat Conference, they were rather proud of the fact they

:37:44.:37:48.

stopped you guys, as I said, sending children up chimneys?

:37:48.:37:52.

was in our manifesto, wasn't it. every manifesto, I believe!

:37:52.:37:57.

Something has changed in politics, hasn't it, do you get that sense?

:37:57.:38:01.

little bit. Let me be fair Tory the Liberal Democrats than he was

:38:01.:38:05.

initially. One area where they have actually been, I think, quite brave,

:38:05.:38:09.

given their own history, is on the whole question of the cuts agenda.

:38:09.:38:14.

The Chief Secretary last been a Lib Dem. That's quite an interesting

:38:14.:38:18.

position. You're the man in charge of all the cuts, is a Lib Dem. So

:38:18.:38:23.

there has been some interesting things. Also, of course, I had a

:38:23.:38:26.

Conservatives with David Cameron day after the election, before the

:38:26.:38:31.

negotiations started, I said to him, there are two areas where there are

:38:31.:38:36.

clear overlaps, one is the liberty agenda, and one is the green agenda.

:38:36.:38:41.

I don't particularly agree with the green agenda, but there were

:38:41.:38:45.

obvious overlaps. It is less unfom for the table than you might think.

:38:45.:38:48.

But at the end of the day there are lots of things we would rather do

:38:48.:38:53.

in a different way. The tax agenda would be different with a Tory-only

:38:53.:38:57.

Government. The European agenda would be different with a Tory-only

:38:57.:38:59.

Government. Maybe some of the balance of decisions over the cuts

:38:59.:39:03.

agenda would be different. Maybe we would have more emphasis on defence

:39:03.:39:07.

and so on than we had before. There is a whole set of areas where there

:39:07.:39:12.

are differences, none of them are deal-breakers. Not one of them is a

:39:12.:39:15.

deal-breaker. During his speech, the Chancellor

:39:15.:39:23.

talked about something called FRAPH fen, it is a brilliant discover -

:39:23.:39:29.

graphene, it is a brilliant thing, it conducts electricity brilliantly.

:39:29.:39:35.

It was discovered by a couple of scientists in Manchester using

:39:35.:39:40.

sticky tape, and they won a Nobel Peace Prize. The Chancellor said

:39:40.:39:45.

whatever we turn it into, it is a British project. To get a feel for

:39:45.:39:50.

what graphene could mean, think Stone Age, Iron Age, silicone age.

:39:50.:39:56.

Scientists think the next stage could be the graphene age, it is

:39:56.:40:01.

that remarkable. Its elagance is in its simplicity, graphite, just like

:40:01.:40:07.

the middle of a pencil, but shaved into layers a single at tomorrow

:40:07.:40:12.

thick, with at tomorrows arranged in Hexagons, once in inch-thick

:40:12.:40:16.

sheets it takes on exciting properties, hence the tag of

:40:16.:40:20.

miracle material. It is uniquely strong and conductive. It might be

:40:20.:40:24.

tweakable to produce a vast range of products, a bit like plastic, or

:40:24.:40:30.

even added to plastic to create new kinds of touch screen technologies,

:40:30.:40:33.

that avoid scarce rare earth elements. The real excitement is

:40:33.:40:39.

the potential to bring us truly fast computing, faster, cheaper,

:40:39.:40:43.

smaller electronic devices, that are also thinner and flexible.

:40:43.:40:47.

Roll-up wearable computers and smartphones, perhaps rb. So much

:40:47.:40:52.

buzz in a field less than ten years old is rare. Some scientists warn

:40:52.:40:56.

this is all just so much potential so far, with products at least five

:40:56.:41:02.

years away. They don't want to promise more than they can deliver.

:41:02.:41:07.

Here it is, the substance that will save the national economy, behold,

:41:07.:41:11.

a single crystal of graphene, surrounded by various bits of

:41:11.:41:17.

graphite. This single crystal is as big as it gets, it is worth about

:41:17.:41:21.

�10,000. We are only borrowing from the nice people at graphene

:41:21.:41:24.

industries. There is some challenges to scale it up into

:41:24.:41:28.

aircraft wings and the like. Two people who know very little indeed

:41:28.:41:36.

about graphene, but are interested in the politicians who marvel at it,

:41:36.:41:40.

are Kevin McGuire and Fraser Nelson. Were you impressed by George

:41:40.:41:44.

Osborne's speech? He didn't have a lot to say and no plan. I have

:41:44.:41:48.

never been to North Korea, I have an idea what it is like. The

:41:48.:41:53.

enforced loyalty there. I think it is voluntary loyalty? Oh yeah. I

:41:53.:41:56.

think in this bubble there is a smugness. We have had more people

:41:56.:42:01.

outside protesting than we have had actually people in this conference.

:42:01.:42:11.

I don't think that is true, is it? There is 30-odd,000 people -

:42:11.:42:15.

30,000-odd people protesting and then you have this here. I thought

:42:15.:42:20.

that would stir them up? Not effectively. Were you impressed

:42:20.:42:26.

by it, it strikes me as being a dull thing? He normally likes

:42:26.:42:31.

pyrotechniques, he's saving these ones for November, I'm sure it will

:42:31.:42:36.

be a dazzling display. Delivery was pretty good, he baffled everybody

:42:36.:42:42.

with his strange credit easing plan that he has got. But there is some

:42:42.:42:51.

uplands at the end of it, a little zipididoda. It was not one that you

:42:51.:42:55.

will remember. People will wake up tomorrow and think, Amanda Knox is

:42:55.:42:59.

free. What about the credit easing, what is that all about? Basically a

:42:59.:43:02.

rather, Government likes to print money. This is a way of doing it.

:43:02.:43:07.

So you can go to small businesses and in a way where they can borrow

:43:07.:43:12.

where they can't from banks A year ago he and David Cameron said

:43:12.:43:17.

Britain was out of the danger zone. It was their equivalent of no more

:43:17.:43:20.

boom and bust. It is clearly not happening, the economy has slipped

:43:20.:43:27.

back, 0.% of growth in the last 10 months, he's blaming the eurozone.

:43:27.:43:31.

I remember Gordon Brown blaiming the Americans, and they would sneer

:43:31.:43:37.

and say it is not the case. Now he's using the same trick, blaming

:43:37.:43:42.

people abroad rather than taking the responsibility himself. Did you

:43:42.:43:45.

detect any qualitative difference between credit easing and some of

:43:45.:43:51.

the wheezes Gordon Brown used to get up to? Those wheezes he used to

:43:51.:43:57.

call desperate, now he's adopting them himself. We have state

:43:57.:44:01.

controlled banks, get them lending, don't get something on the back of

:44:02.:44:06.

it that nobody understands and won't help small businesses. After

:44:06.:44:09.

listening to Philip Hammond I'm not sure about that. Fraser Nelson, did

:44:09.:44:16.

you feel it was a Tory policy? Credit easing? Yes. It is something

:44:16.:44:19.

Gordon Brown could have come up with, because it involves concealed

:44:19.:44:25.

debt. You do think if Gordon Brown was watching, he would be thinking,

:44:25.:44:29.

why didn't he come up with that. I can't say I'm wild about it. If you

:44:29.:44:32.

think banks are bad at lending money, you wait until Government

:44:32.:44:37.

does it. I have a feeling this will not be the great silver bullet.

:44:37.:44:43.

What about the party as a whole, from what we see here? Huge morale.

:44:43.:44:51.

They are pretty happy. I would say. I don't know quit - quite what you

:44:52.:44:56.

expected. Look at that, they are whistling while they work. These

:44:56.:45:00.

were the guys who fought for the Conservative manifesto and seeing

:45:00.:45:03.

pretty much all of it delivered by a coalition Government. Looked a

:45:03.:45:13.

ral kal school reform and welfare reform. - radical school reform and

:45:13.:45:18.

health reform. They pay to come here. Not here, it was free. Look

:45:18.:45:22.

at that, Conservative, it doesn't mention t they have eradicated the

:45:22.:45:25.

party. You go round on the fringe and you will find a lot of

:45:25.:45:29.

complaints, you mentioned them, the Human Rights Act, about Europe.

:45:29.:45:34.

Both of which Nick Clegg has David Cameron in a headlock and won't let

:45:34.:45:36.

him go. There you hear complaints about why aren't we getting tax

:45:36.:45:40.

cuts now to get the economy going. They don't want increased

:45:40.:45:46.

investment in public service bes, they want - public services, they

:45:46.:45:54.

want tax cuts and they want them no now. Grieve grove grieve is against

:45:54.:45:57.

abortion and Human Rights Act, the Conservatives were having these

:45:57.:46:02.

arguments before coalition. They have rediscovered the trick of

:46:02.:46:06.

loyalty. Loyalty was the party's secret weapon? It has come back.

:46:06.:46:12.

There isn't that much to get really angry about. Hang on. Fraser, look

:46:12.:46:16.

at what's happening to the economy, look at what's happening to

:46:16.:46:20.

unemployment, public services, look what's happening to living

:46:20.:46:24.

standards. Before you start blaming it on Labour's structural deficit,

:46:24.:46:27.

remember that David Cameron and George Osborne were committed to

:46:27.:46:31.

Labour's spending up to 2010. It was only the global financial

:46:31.:46:35.

collapse that sent that haywire. will continue this argument

:46:35.:46:42.

tomorrow, I think. Thank you very tonight. We will have an audience

:46:42.:46:46.

of Tory women to see if the party can recover its support from that

:46:46.:46:50.

part of the country at large, and I will be speaking to Boris Johnson.

:46:50.:46:57.

will be speaking to Boris Johnson. Until then, goodnight.

:46:57.:47:01.

Hello, the weather is on the change. Through the rest of this week it

:47:01.:47:05.

will feel much more like autumn should feel. We start the day with

:47:05.:47:09.

dry weather but a lot of cloud. Limited brightness, the best across

:47:09.:47:13.

the more eastern parts of the UK. Temperatures will be as much as 10

:47:13.:47:15.

degrees lower than they have been. You notice the difference out there.

:47:15.:47:22.

A reasonable sort of day, it has to be said A small chance of a shower,

:47:22.:47:26.

generally dry, breezy, rather cloudy, but brightness from time to

:47:26.:47:31.

time. Across the more western parts of England and Wales cloud, thicker

:47:31.:47:35.

here, dampness for parts of Cornwall and western parts of Wales.

:47:35.:47:39.

To the east of the hills a better chance it will stay essentially dry.

:47:39.:47:43.

For Northern Ireland a fairly cloudy scene, but again, mostly dry.

:47:43.:47:47.

Some showers across the northern coastal areas and some more

:47:47.:47:51.

meaningful showers peppering western Scotland on a stiff breeze.

:47:51.:47:55.

Further east we will see brighter spells. For the next few days it is

:47:55.:47:58.

topsy turvy, that's for sure, wet and windy weather in northern

:47:58.:48:02.

western areas on Wednesday. Strong winds and potentially heavy rain.

:48:02.:48:06.

Further south, essentially we will see outbreaks of rain. The first

:48:06.:48:09.

significant rain many places have seen for quite a while. On

:48:09.:48:15.

Wednesday it is a story of rain initially across the north and west,

:48:15.:48:18.

Chancellor George Osborne tells the Conservative conference that money is still tight and there will be no deviation from his deficit reduction plan. Will it be enough to get the economy back on track, and what if it isn't? Presented by Jeremy Paxman.


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