:00:12. > :00:16.Woe, woe, thrice woe, Government policy is hurting but so far it is
:00:16. > :00:18.not working. The British economy is in worse pain than any time in
:00:18. > :00:23.recent memory. According to the Chancellor of the Exchequer, there
:00:23. > :00:26.is no alternative, in fact, even more of the same. Promises of
:00:26. > :00:31.quick-fixes and more spending this country can't afford, at times like
:00:31. > :00:34.this, are like the promises of a quack doctor selling a miracle cure.
:00:34. > :00:39.quack doctor selling a miracle cure. We do not offer that today.
:00:39. > :00:43.So, Paul, is this advance surgery, or death by a thousand cuts?
:00:43. > :00:46.don't know if it is the medicine killing the patient, but something
:00:46. > :00:49.has radically altered the prognosis for British growth. I will be
:00:49. > :00:53.asking the chief secretary to the Treasury, why, after 18 months of
:00:53. > :00:57.failure, we should give the Government six more years to do
:00:57. > :01:01.what they promised. George Osborne is now borrowing even more money
:01:01. > :01:05.than Gordon Brown's Government did. Do the similarities go yet further?
:01:05. > :01:15.What ought the Government to be doing when we are all in such an
:01:15. > :01:17.
:01:17. > :01:21.Rotten growth, rising unemployment, longer to work until you can retire
:01:21. > :01:25.and on top of all that, billions more required in borrowing. Plan A,
:01:25. > :01:30.to sort out the economy, hasn't worked. The promise to balance the
:01:30. > :01:33.books by the next election is dust, so the answer is, more of plan A,
:01:33. > :01:37.and keep your fingers crossed, because if the eurocrisis gets
:01:37. > :01:47.worse, the promise is recession. First tonight, David Grossman
:01:47. > :01:50.
:01:51. > :01:53.reports. This was never going to be a feel-
:01:53. > :02:00.good classic. George Osborne was always unlikely
:02:00. > :02:07.to make it on to any greatest hits collection. Who could forget Gordon
:02:07. > :02:10.at his growly best with PBR2006. Who can forget, the tenth
:02:10. > :02:13.consecutive year of economic growth. They don't write them like that any
:02:13. > :02:17.more. As the present Chancellor left for the Commons, much of the
:02:17. > :02:22.softening up had been done. Many of the new measures announced today,
:02:22. > :02:26.designed to create growth had been pre-briefed. Why? Well he knows
:02:26. > :02:32.today those measures just can't compete with the grim news, that
:02:33. > :02:36.the economic hole we are in, is far deeper than previously thought.
:02:36. > :02:40.OBR today has shown new evidence that an even bigger component of
:02:41. > :02:44.the growth that preceded the financial crisis was an
:02:44. > :02:48.unsustainable boom, that the bust was deeper and had an even greater
:02:49. > :02:53.impact on our economy than previously thought, and the result
:02:53. > :02:57.of this analysis is that the OBR have significantly reduced their
:02:58. > :03:02.assumptions about spare capacity in our economy, and the trend rate of
:03:02. > :03:04.growth. This increases their estimate of the proportion of the
:03:04. > :03:08.deficit that is structural. In other words, the part of the
:03:08. > :03:12.deficit that doesn't disappear, even when the economy recovers.
:03:12. > :03:16.it gets worse. Not only is the hole bigger than the official
:03:16. > :03:21.predictions told us, growth, the engine, that will help fill that
:03:21. > :03:25.hole, is going to be far slower than predicted. Way back in 2010,
:03:25. > :03:31.growth for this year was predicted to be 2.3%, what do you know, it
:03:31. > :03:37.has tumbled down to just 0.9%. Back then they told us growth for 2012
:03:37. > :03:41.would be 28%, in the new charts it is in at 0.7%, ouch! But the
:03:41. > :03:45.biggest climber, borrowing, up an extra �100 billion on the old
:03:45. > :03:49.credit card over the next four years. As you might expect, Labour
:03:49. > :03:53.see this as evidence that the coalition made the wrong call on
:03:53. > :03:59.the economy. The Chancellor's entire economic and fiscal strategy
:03:59. > :04:03.is now in complete disarray. And yet all which get are excuses.
:04:03. > :04:06.Blaming anyone and anything, the Labour Government, the snow, the
:04:07. > :04:15.royal wedding, the Japanese earthquake, higher inflation, VAT,
:04:15. > :04:21.the eurozone. Low paid, low paid dinner ladies and Teaching
:04:21. > :04:25.Assistants, anybody but himself Mr Teaker -- Mr Speaker. When it is
:04:25. > :04:28.the Chancellor to blame, it is his failing plan that has pushed up
:04:29. > :04:33.unemployment and pushed up borrowing. It is his reckless
:04:33. > :04:37.gamble that has made things worse here in Britain, not better.
:04:37. > :04:42.question then, what does the Government plan to do about this
:04:42. > :04:46.new, bigger hole? First, the relatively easy changes, the
:04:46. > :04:54.Chancellor announced slower growth in the overseas aid budget, to keep
:04:54. > :04:58.it at 0.7% of GDP, the rest gets much harder, however you try to
:04:58. > :05:03.spin it. Not quite a non-mover, public sector pay rises will be
:05:03. > :05:10.limited to 1% for an extra two years. A surprise climber, the
:05:10. > :05:12.pension age rising to 67 in 2026. Neither of these changes will be
:05:12. > :05:18.softening the resolve of public sector union, they go on strike
:05:18. > :05:23.tomorrow. Nor will the OBR forecasting 7 10,000 public sector
:05:23. > :05:33.workers losing their jobs. That forecast sup from 4 Hunniford,000
:05:33. > :05:39.
:05:39. > :05:44.in March? I found it incred -- I found it incredible the attacks on
:05:44. > :05:48.the public sector workers, they have been through a two-year pay
:05:48. > :05:53.freeze with inflation through the roof, food prices up 8%, yet their
:05:53. > :05:58.pay has been held back because of the failure of the banking system,
:05:58. > :06:02.nothing to do with themselves. Institute for Fiscal Studies is not
:06:02. > :06:07.known for employing excitable hot heads, when they find something
:06:07. > :06:11.remarkable, we should perhaps listen. As a result of the dramatic
:06:11. > :06:15.changes in the growth forecasts, we will have another two years of
:06:15. > :06:19.spending cuts, big spending cuts after the next election, after five
:06:19. > :06:24.years of big spending cuts we will have seven years of spending cuts.
:06:24. > :06:29.Same level in 2017 as we have had in this parliament. How does that
:06:29. > :06:33.compare historically with previous fiscal contractions? We have been
:06:33. > :06:37.pointing out five years of spending cuts is more than we have ever
:06:37. > :06:40.managed before, seven years even more, this is historically
:06:40. > :06:44.unprecedented. Not only has the economics of the deficit changed,
:06:44. > :06:49.so has the politics. The central plank of the Government's economic
:06:49. > :06:52.plan was to deal with the nasty, difficult business of cutting the
:06:52. > :06:56.deficit by the time of the next general election. Allowing both
:06:56. > :06:59.parties to go to the country, having claimed to have dealt with
:06:59. > :07:02.the nation's financial problems, but offering a sunnier, more
:07:02. > :07:07.optimistic prospect for the future. Now, they are going to have to
:07:07. > :07:13.offer more pain. Remember, all this dreadful
:07:13. > :07:16.economic news is predcated on hoping for the best in the eurozone,
:07:16. > :07:22.assuming they manage to avoid catastrophic meltdown. If that
:07:22. > :07:27.happens, we could look back on today's numbers as wild, crazy
:07:27. > :07:35.optimisim. We will see you back in March 2012 for the Budget, those
:07:35. > :07:38.numbers could have tumbled again. Paul Mason is here. How important
:07:38. > :07:42.is the downgraded growth? It is huge, because on day like today,
:07:42. > :07:46.you do want to know when are things getting back to normal. You want to
:07:47. > :07:49.know when do we balance the books. On both those questions the
:07:49. > :07:55.Government has just severely missed what it thought was going to happen.
:07:55. > :08:01.Let's have a look here at the world that the coalition thought it would
:08:01. > :08:06.be presiding over. Five years of recovery, start anything 2010, 2%
:08:06. > :08:10.growth, then rising to 3%, falling back a bit, you glide into the next
:08:10. > :08:15.election with that as your record. This is the reality, The Office
:08:15. > :08:19.showed to them today. That red -- the office of budget responsibility
:08:19. > :08:26.showed them today. The red line, we are lucky if we are not already in
:08:26. > :08:30.a recession and flattening out. In the gap between reality and
:08:30. > :08:34.aspiration is a whole bunch of political pain for the Government.
:08:34. > :08:39.Will they ever meet fiscal targets? They have done it by moving it back
:08:39. > :08:42.a year, and by adding another �30 billion on to austerity. This is
:08:42. > :08:47.the austerity we knew. David was talking about in the report there,
:08:47. > :08:50.with the guy from the IFS, this is the next four years of the
:08:50. > :08:56.coalition Government. Just to have any chance of balancing, of meeting
:08:56. > :09:01.the target they set themselves, the fiscal mandate, they have had to do
:09:01. > :09:05.this, adding an extra �30 billion, by 2016, to the austerity. The
:09:05. > :09:08.problem for them there is, these last two years are after the next
:09:08. > :09:12.election. It rather begs the question. George Osborne might be
:09:12. > :09:14.signed up to this, and large parts of the Conservative Party might,
:09:14. > :09:19.but the Liberal Democrats I'm not sure whether they thought that was
:09:19. > :09:25.in the coalition agreement. To go into parliament number two with the
:09:25. > :09:29.biggest fiscal austerity programme ever. So you have got the ratings
:09:29. > :09:32.agency saying this stuff leaves you with almost no room for manoeuvre,
:09:32. > :09:36.you need to watch it in terms of sovereign debt crisis. George
:09:36. > :09:42.Osborne has responded, he has his retaliation in first, saying the
:09:42. > :09:46.facts changed, I changed my mind, I will do more austerity.
:09:46. > :09:52.George Osborne's righthand man is the Liberal Democrat chief
:09:52. > :09:56.secretary to the Treasury, Danny Alexander. He is here, welcome. So
:09:56. > :10:00.you are accepting that plan A hasn't worked? No, I don't accept
:10:00. > :10:05.plan A hasn't worked. What I do accept very much is what Paul has
:10:05. > :10:08.just set before us, which is that for a whole range of reasons that
:10:08. > :10:11.the OBR set out today, growth is slower and it will take longer to
:10:11. > :10:15.meet the goals we set out. Plan A was going to balance the books
:10:15. > :10:18.within this parliament, you are clearly not going to do that?
:10:18. > :10:23.built in considerable flexibility in our plans when we set them out.
:10:23. > :10:27.Let me explain. The promise was to do it in the parliament? We set out
:10:27. > :10:31.a fiscal mandate to balance the fiscal deficit over a five-year
:10:31. > :10:38.period, the OBR said we will do that today. We set to get the whole
:10:38. > :10:43.of the UK debt falling by 2016, the OBR say we will achieve that,
:10:43. > :10:48.against the background of crisis in the eurozone, rising commodity
:10:48. > :10:51.prices, and also they told us today that the size of the crisis we saw
:10:51. > :10:57.a few years ago was worse. didn't hear what David Cameron said
:10:57. > :11:01.about balancing the books by 2015. Let me ask you this. If austerity
:11:01. > :11:05.hasn't brought results in the time he predicted, why is the answer
:11:05. > :11:08.more austerity? We need to make sure we retain something very
:11:08. > :11:11.important to this country, achieved by this coalition Government, the
:11:11. > :11:14.credibility of the fiscal plans, which has helped to ensure we have
:11:14. > :11:18.very low interest rates in this country. That benefits individuals
:11:18. > :11:21.with their mortgages and businesses with their loans. If you go back to
:11:21. > :11:25.April 2010, you will see that Britain's long-term interest rates
:11:25. > :11:34.are actually slightly higher than Italy, for example, now there is a
:11:34. > :11:44.much bigger gap the other way, precisely because this coalition
:11:44. > :11:45.
:11:45. > :11:49.plans have credibility. No other cuts guaranteed within this
:11:49. > :11:52.parliament? We are sticking to the plan. You can't do that, because
:11:52. > :11:56.you have a caveat elsewhere? David explained, we are rolling
:11:56. > :12:00.that forward for a further two years, in order to make sure we
:12:01. > :12:04.deal with the structural deficit we inherited. If there is another
:12:04. > :12:07.crisis which you are already blaming your difficulties on
:12:07. > :12:14.external factors, if will are further external factors there will
:12:14. > :12:18.be further cuts? The OBR presented an analysis of the deterioration.
:12:18. > :12:22.You can query them on the analysis they have put out, but clearly the
:12:23. > :12:27.crisis in the eurozone is a major problem for the UK too. It is our
:12:27. > :12:30.major trading partner. I was merely asking you what you would do if
:12:30. > :12:36.further circumstances of a similar kind happen in future. I note you
:12:36. > :12:43.don't want to answer that. Let me ask you this, factually, of the
:12:43. > :12:53.cuts announced, �30 billion additional cuts, �.2 billion, �1.2
:12:53. > :12:53.
:12:53. > :13:01.billion comes from changes to the tax credit system, where does the
:13:01. > :13:04.other �28.8 billion come from? will be found in 2016/17, in good
:13:04. > :13:07.time, well before the next election, we will set out the measures to
:13:07. > :13:12.deliver the additional savings in the next parliament. You haven't
:13:12. > :13:15.decided where to find �28.8 billion? No. We have conducted a
:13:15. > :13:17.Spending Review, that set out the details of our cuts for this
:13:17. > :13:21.parliament. We have just decided today what the path of spending is
:13:21. > :13:27.in the following two years, and in due course we will set out what
:13:27. > :13:30.that means in detail. You are going into the next election, promising
:13:30. > :13:33.further billions of pounds in cuts in public spending. That is what
:13:33. > :13:39.you are going to say in your manifesto in the next election?
:13:39. > :13:43.afraid so, yes. I thought your promise was that in the last year
:13:44. > :13:46.of this Government, you would not necessarily be giving unequivocal
:13:47. > :13:50.endorsement to every Government policy? As a Government we
:13:50. > :13:55.originally, as you said earlier, set out plans that would meet our
:13:55. > :13:58.targets a year early, in 2014, 15, because of the economic
:13:58. > :14:00.circumstances have deteriorated, we need to make the commitment for
:14:00. > :14:04.future years. Liberal Democrats and Conservatives will work together in
:14:04. > :14:08.Government, to set out plans for those following two years, and of
:14:08. > :14:13.course we will both be committed to delivering them. What is the point
:14:13. > :14:15.of voting for you as opposed to the Conservatives then? There are lot
:14:15. > :14:19.of points to vote Liberal Democrats rather than Conservative. Those are
:14:19. > :14:24.things we will set out at the general election in our respective
:14:24. > :14:29.manifestos. Let's take the most potent example? That is not written
:14:29. > :14:36.yet. You will be telling us we have to save another �0 billion some
:14:36. > :14:38.where or other. Let's take the most topical answer, what was announced
:14:38. > :14:41.today by the Chancellor of the Exchequer, what was not in the
:14:41. > :14:45.proposal, which the Tories wanted to put in, and you in the Liberal
:14:45. > :14:48.Democrats kept out. Which proposal are you talking about. The Autumn
:14:48. > :14:52.Statement today, all the plans for cutting public spending to get the
:14:52. > :14:55.economy back on track, what did the Tories want to put in there that
:14:55. > :15:00.you the Liberal Democrats kept out? We had lots of debates within the
:15:00. > :15:03.Government. I'm not going to air those debates in public. We agreed
:15:03. > :15:07.all the measures in today's Autumn Statement. Precisely for the
:15:07. > :15:12.reasons that I have said. We have not yet set out the precise measure
:15:12. > :15:15.that is we will take in the next parliament to balance the books.
:15:15. > :15:17.I'm discussing what happened last week? We need to retain the
:15:18. > :15:21.credibility we have. What credibility do you have if you
:15:21. > :15:25.can't tell us there is a single measure you kept out of the Autumn
:15:25. > :15:29.Statement as a consequence of you being in Government? I'm not going
:15:29. > :15:37.to get into airing discussions and debates that took place within the
:15:37. > :15:41.Government. Was there anything? There were lots of discussions and
:15:41. > :15:46.debates about what we might do. there nothing, saying as a Liberal
:15:46. > :15:48.Democrat, I will keep that out? There are plans for investing in
:15:48. > :15:52.infrastructure, transport, broadband, to get the economy
:15:52. > :15:54.stronger for the long-term. As well as the fact we have taken steps
:15:54. > :15:59.that retain the credibility, that delivers the low interest rates,
:15:59. > :16:02.that matter most to people, low interest rates that we put at risk
:16:02. > :16:06.if Labour's alternative was put in place in this country. When you
:16:06. > :16:09.listen to George Osborne today, did you think, that sounds like Nick
:16:09. > :16:11.Clegg? Of course I don't think that. I think there is the Chancellor of
:16:11. > :16:15.the Exchequer, who I work closely with in the Treasury, setting out
:16:15. > :16:23.the agreed Government plans for the economy, over the next few years.
:16:23. > :16:27.That is the right and proper way to go p it. What about job losses,
:16:27. > :16:32.there is a further 200,000 jobs lost in the public sector, have you
:16:32. > :16:38.decided who will lose their jobs? As the OBR says in its report,
:16:38. > :16:42.those figures are based on un-- are facing a lot of uncertainty. They
:16:42. > :16:48.are based on assumptions that the OBR makes that all of the further
:16:48. > :16:52.cuts in the future years you are referring to are cuts to
:16:52. > :16:56.departmental budgets. There are other ways of makes those cuts, I
:16:56. > :17:01.would treat the figures with a degree of caution, as the OBR says.
:17:01. > :17:07.For this plan to work, there has to be no crisis within the eurozone?
:17:07. > :17:11.As the OBR says, the phrase they use is "the eurozone struggling
:17:11. > :17:15.through", to meet these plans. Of course, there is a huge amount of
:17:15. > :17:18.uncertainty because of the eurozone crisis. If the eurozone doesn't
:17:18. > :17:22.resolve its problems that could have a serious knock-on effect for
:17:22. > :17:26.the UK economy. We have to hope it doesn't happen? We are working with
:17:26. > :17:30.the Government and European partners to make sure it doesn't.
:17:30. > :17:34.Rachel Reeves, you are the Shadow Chief Secretary to the Treasury.
:17:34. > :17:37.You are not going to sit there and tell us had they followed Alistair
:17:38. > :17:42.Darling's plan, there would have been growth at 3% or something, are
:17:42. > :17:47.you? Whoever was going to be in power after the last election would
:17:47. > :17:50.have had to make tough decisions about tax and spending. And a lot
:17:50. > :17:53.of cuts? What happens in the eurozone will have huge
:17:53. > :17:57.implications for British families. Have you a sense of how it might
:17:57. > :18:00.have been if you had won the election? We had set out a deficit
:18:00. > :18:05.reduction of halving it over the parliament. The Government took a
:18:05. > :18:08.gamble to cut as far and fast as they did, that has choked off
:18:08. > :18:11.economic recovery. You know perfectly well the Office for
:18:11. > :18:16.Budget Responsibility said today the reason for the problem with
:18:16. > :18:20.growth was nothing to do with these plans. It was to do with energy
:18:20. > :18:23.prices and world commodity prices? The economic stagnation, the
:18:23. > :18:27.flatlining economy, started in Britain well before the eurozone
:18:28. > :18:33.crisis. A year ago the Government. I didn't mention the eurozone
:18:33. > :18:36.crisis they don't mention it, they mention energy prices and world
:18:36. > :18:40.commodity prices? Of course those things put up inflation. But the
:18:40. > :18:44.flatlining economy started a year agoful the Chancellor then blamed
:18:44. > :18:48.the snow. Then he blamed the royal wedding, because of the extra bank
:18:48. > :18:51.holiday, now he's blaming Europe. At some point the Chancellor has to
:18:51. > :18:55.take responsibility for his own actions. It was his poll assist
:18:55. > :19:01.decisions that choked off economic recovery here in Britain. Let me
:19:01. > :19:04.ask you another factual thing, you saw the figures today, an extra
:19:05. > :19:09.�111 billion of borrowing over the next few years. How much greater
:19:09. > :19:11.would it have been if we followed your alternate Government plans?
:19:11. > :19:15.believe, because the Government have choked off growth, you get
:19:15. > :19:20.rising unemployment, you are paying more out in benefits, and you are
:19:20. > :19:24.getting less in taxes because more businesses are failing. The extra
:19:24. > :19:28.borrowing, the �158 billion extra since last year, is the cost of
:19:28. > :19:32.economic failure. If you half the budget deficit over this parliament,
:19:32. > :19:36.slower rate of budget deficit reduction, then your growth would
:19:36. > :19:39.have continued, unemployment wouldn't have reached the peaks it
:19:39. > :19:44.did. You are saying there would have been no more borrowing, you
:19:44. > :19:47.are not really saying that are you? I honestly believe if you had a
:19:47. > :19:50.more balanced plan for deficit reduction, growth would have kept
:19:51. > :19:53.going, unemployment wouldn't have risen to the levels it has risen,
:19:53. > :19:58.and we are paying more because of economic failure, unemployment
:19:58. > :20:01.benefits are going up. What do you make of that? It is incredible, the
:20:01. > :20:05.plan set out by the previous Government would have added at
:20:05. > :20:08.least another �100 billion to the borrowing figures we saw today, the
:20:08. > :20:12.thing we haven't heard from the Labour Party at all is any of the
:20:12. > :20:18.spending cuts that were put forward already in this parliament, or the
:20:18. > :20:22.tax rises they support. Not only do it. You it put it directly to her?
:20:22. > :20:26.I would love to hear any spending cut we are putting forward that
:20:26. > :20:29.Labour Party supports. Right now your position is we can't have any
:20:29. > :20:33.austerity. Everything we put forward you object to. It would be
:20:33. > :20:37.nice to hear one spending cut you support. On police cuts, we said we
:20:37. > :20:40.would support cuts of 12% over this parliament, compared with the 20%
:20:40. > :20:44.cuts the Government have put forward. We recognise the need to
:20:44. > :20:49.be cuts, we recognise the need for tax increases, we would do it at a
:20:49. > :20:53.slow rate. Those are the choices we would make. If you look at the
:20:53. > :20:59.Government spending plans and borrowing now, it will be �37
:20:59. > :21:04.billion. She has given you -- billion higher than Alistair
:21:04. > :21:07.Darling. You just asked for one. She did give you one. 18 months
:21:07. > :21:12.into this parliament, and the Government need to start taking
:21:12. > :21:16.responsibility for its own actions. Because we're borrowing �158
:21:16. > :21:20.billion more compared with a year ago, because unemployment is rising
:21:20. > :21:24.and businesses are failing. I do take responsibility for our actions,
:21:24. > :21:26.and I accept this country has very, very serious economic problems.
:21:26. > :21:29.Those serious economic problems require a Government that is
:21:30. > :21:33.capable of taking the tough decisions to secure our economic
:21:33. > :21:38.credibility, to deliver the low interest rates this country needs,
:21:38. > :21:41.and your plan is one that would lead to more borrowing, more debt,
:21:41. > :21:44.higher interest rates. Ed Balls yesterday on the radio said he
:21:44. > :21:47.thought low interest rates were a sign of failure, he wanted higher
:21:47. > :21:50.interest rates, which would cause people to have more expensive
:21:50. > :21:55.mortgages and businesses to fail. One million young people are out of
:21:55. > :21:59.work, 2.6 million people out of work. That is now projected to
:21:59. > :22:03.increase into next year. So those are the decisions you have made.
:22:03. > :22:07.Those are the consequences of your decisions. The other consequence is
:22:07. > :22:11.you are borrowing more to pay for the benefits. One of the things I
:22:11. > :22:16.agree with you is the importance of youth unemployment. As a Government
:22:16. > :22:20.and Liberal Democrat, I don't want to see people scarred by
:22:21. > :22:24.unemployment, so today we announced another billion pounds for aout
:22:24. > :22:28.unemployment programme so every 18- 24-year-old will have access to a
:22:28. > :22:35.job or training place. 18 months ago you scrapped the Future Jobs
:22:35. > :22:39.Fund. That is because it was an expensive failure. You have already
:22:39. > :22:44.let down so many young people. Youth unemployment, long-term, is
:22:44. > :22:50.up 80% since the start of the year. Decisions you made are causing
:22:50. > :22:54.youth unemployment to rocket. know the Future Jobs Fund was an
:22:54. > :22:58.expensive failure. Why are you reintroducing a pale imitation.
:22:58. > :23:01.growth for this country is plan you put forward to destroy this
:23:01. > :23:07.country's economic credibility and lead us to higher interest rates.
:23:07. > :23:11.Can I come across this, we are running out of time. Do you support
:23:11. > :23:15.the public sector workers' strike tomorrow? I think the strikes are a
:23:15. > :23:18.sign of failure. I'm not going to support a strike. So you don't
:23:18. > :23:22.support the strike? I don't, because it is a sign of failure.
:23:22. > :23:25.But the Government...That Is the Labour Party's official policy, you
:23:25. > :23:30.do not support the strike? We don't support the strike because it is a
:23:30. > :23:35.sign of failure. We think the Government needs to give something
:23:35. > :23:40.more, to low-paid public sector workers. They have seen today their
:23:40. > :23:44.pay will be frozen for another two years. Your opinion tomorrow, it is
:23:44. > :23:48.OK to strike, we can't support you, but we think it is a demonstration
:23:48. > :23:52.of failure? We understand why they are striking, effectively, low-paid
:23:52. > :24:01.public sector workers are having a 3% tax increase because of the
:24:01. > :24:05.increased contributions. We think a strike is a failure. We want the
:24:05. > :24:08.Government, we understand why they are striking, it is a tax increase
:24:08. > :24:12.on public sector workers. There is only one word for the predicted
:24:12. > :24:18.rate of growth for the economy, that is rubbish. 1% next year, only
:24:18. > :24:23.this spring it was predicted at 2.5%. No more glad, confident
:24:23. > :24:27.morning, hello the endless morning after. Gordon Brown may have talked
:24:27. > :24:31.nonsense about having eradicated boom and bust, now it is just bust,
:24:31. > :24:41.sometimes it is difficult to tell the difference between them. Paul
:24:41. > :24:46.
:24:46. > :24:49.Mason has what we have to look It will be all right eventually,
:24:49. > :24:54.that has been the message from George Osborne since he came to
:24:54. > :24:58.power. One day the UK will recover, and with the private sector driving
:24:58. > :25:03.the growth. But that bright tomorrow is getting further and
:25:03. > :25:07.further away. At the centre of the Government's
:25:07. > :25:11.recovery plan was rebalancing, from state spending and credit-fuelled
:25:11. > :25:15.consumption, to a future based on factories, ports, exports. So
:25:15. > :25:20.what's happened to that? I think the objective of rebalancing is
:25:20. > :25:26.absolutely right, indeed it has to happen. But so far there is next to
:25:26. > :25:29.no sign of it whatsoever. The external environment has massively
:25:29. > :25:33.deteriorated, hopes for a strong recovery have been dashed by events
:25:33. > :25:35.on the continent and around the world. Meanwhile companies aren't
:25:36. > :25:39.increasing their investment, if anything they are set to cut it
:25:39. > :25:42.back. There was supposed to be two
:25:42. > :25:47.drivers of rebalancing, more business investment, and more
:25:47. > :25:52.exports. Today the Government's own watchdog said we probably had the
:25:52. > :25:55.bulk of that effect already. Recent data revisions suggest that exports
:25:55. > :25:59.have picked up more already in response to the weakness of the
:25:59. > :26:03.pound than previously thought. So there is less of a boost still to
:26:03. > :26:07.come interest this quarter. In the case of business investments, we
:26:07. > :26:10.think firms may have less cash available to invest than we
:26:10. > :26:15.previously thought. Another thing we learned today, about the future,
:26:15. > :26:19.is it will be more austere. The cuts will go on long after the 2015
:26:20. > :26:24.election. And those who advocated slashs back the state to boost
:26:24. > :26:28.growth are delighted. I think this is beyond anything we have an
:26:28. > :26:33.experience of before this particular recession. So the scale
:26:33. > :26:37.of cuts we are talking about here is going on for six years of
:26:37. > :26:44.continuous cuts. We are achieving something like �116 billion of cuts
:26:44. > :26:48.by the end of the period, in spending. �147 billion cuts in the
:26:48. > :26:55.total deficit. This is absolutely extraordinary, unprecedented.
:26:55. > :26:59.The huge variable now is what happens in Europe. If the continent
:26:59. > :27:04.drifts towards default and euro exits, that could mean the
:27:04. > :27:11.difference between light at the end of a tunnel for Britain and the
:27:11. > :27:19.tunnel collapsing. A further euro blowout could lead to raising of
:27:19. > :27:23.GDP and enormous spending cuts and rising taxes.
:27:23. > :27:28.The economic future right now howevers somewhere between the
:27:28. > :27:33.controllably austere and euro catastrophy. However clier the goal
:27:33. > :27:37.of a rebalanced Britain, it will be impossible to achieve in an
:27:37. > :27:40.unbalanced world. Where can we expect growth to come
:27:40. > :27:45.from? One for the former Conservative cabinet minister, Lord
:27:45. > :27:51.Heseltine, who heads the Government's Regional Growth Fun,
:27:51. > :27:56.and our guest from the science policy research unit, and author of
:27:56. > :27:59.the The Entrepreneurial State. People seem to say, gosh this is a
:27:59. > :28:02.bleak picture today, did you see it as such? It is a bleak picture. We
:28:03. > :28:07.didn't need the Chancellor to get up. We know Europe is stagnant, the
:28:07. > :28:12.Middle East is in turmoil, and these are the markets that, in part,
:28:12. > :28:16.we have to serve. So it is no surprise, that we have got a very
:28:16. > :28:22.difficult situation. The issue is what should the Government do. In
:28:22. > :28:26.my view the Chancellor's statement was one of the best of its sort I
:28:26. > :28:32.have listened to. For this reason, for as long as I have been in
:28:32. > :28:37.politics, the policy has to be overconsume and underinvest, to
:28:37. > :28:40.hear a Chancellor say we will boost the investment about the long-term
:28:40. > :28:43.improvement of Britain's competitiveness, even in the harsh
:28:43. > :28:48.circumstances was courageous and right. Were you impressed? I was
:28:48. > :28:52.much less impressed. Because I absolutely agree we need to
:28:52. > :28:57.increase business investment, business is currently hording lots
:28:57. > :29:01.of cash, �75 billion is horded not spent. How do you do it? We needing
:29:01. > :29:06.to back to economic they arey. It is not enough to say increase
:29:06. > :29:09.investment. What drives investment is understanding where new
:29:09. > :29:13.technological opportunities are, it is not small measures, little
:29:13. > :29:19.bandages here and there, infrastructure projects, some
:29:19. > :29:24.apprenticeships, some enterprise zones. Why did Pfizer leave
:29:24. > :29:29.Sandwich Kent, they didn't go to a low-cost tax haven, they went to
:29:29. > :29:34.Boston, an expensive part of the US, with huge state investment in
:29:34. > :29:39.universities and schools, especially national laboratories.
:29:39. > :29:45.NIH funding is what drives where farm ma is going. Your argument is
:29:45. > :29:48.Britain should be doing something similar? Absolutely. The scale is
:29:48. > :29:50.wrong? The scale and signals are wrong. I don't think she heard the
:29:50. > :29:55.statement. The Chancellor talks about looking at the opportunity of
:29:55. > :29:58.the third London airport, he talked about the Atlantic Bridge in
:29:58. > :30:04.Merseyside. He talked about a billion pounds for the Regional
:30:04. > :30:08.Growth Fun, of which I'm chairman. He talked about a billion worth of
:30:08. > :30:12.investment funds in every aspect. Reignighting and getting British
:30:12. > :30:15.Industry investing, the essence, if I may say so, is confidence, and
:30:15. > :30:25.confidence is crucially dependant on maintaining low interest rates,
:30:25. > :30:30.
:30:30. > :30:34.and a Government in control of the economy. Well, I listened to the
:30:34. > :30:40.statement and there was missing an analysis of what the economy will
:30:40. > :30:44.be. Every leading country, Germany, Finland, China, they are investing
:30:44. > :30:47.massively in the environment. The main thing holding the Government
:30:48. > :30:52.back, is the ideolgical position that all Government can do is fix
:30:52. > :30:56.things here but not drive economic change and growth. That isn't true,
:30:56. > :31:00.they did broadband a massive incentive around broadband.
:31:00. > :31:03.Anything around the green economy. There is a whole range of
:31:03. > :31:09.Government policies to support the green economy. He didn't talk about
:31:09. > :31:12.it. Look, the fact is, and I think we agree, this is not an industrial
:31:13. > :31:16.strategy, this is an economic statement by the Chancellor. But it
:31:16. > :31:22.begins with investment, it begins with private sector job creation,
:31:22. > :31:25.and what he now has to do, I hope, is to turn this into a long-term
:31:25. > :31:28.strategic industrial policy for this country. Yes, but many of the
:31:28. > :31:33.measure that is you mentioned before were, in fact, just
:31:33. > :31:38.repairing things they took away from the 2010 Spending Review.
:31:38. > :31:44.simply isn't the case. A �1.7 billion cut in research. Today we
:31:44. > :31:47.heard they will increase it by �200 million. Aren't you persuaded by
:31:47. > :31:50.all the talk of rebalancing the economy. Doesn't that show the
:31:50. > :31:53.Government is committed to investment in other areas other
:31:53. > :31:56.than the financial sector? We have to define what we mean by
:31:56. > :32:00.rebalancing. The main rebalancing that needs to be done is not so
:32:01. > :32:05.much from the size of the financial sector, but from the short run
:32:05. > :32:10.priorities, if you want, that the financialisation of the economy has
:32:10. > :32:15.had on every single sector. The fact that the most innovative
:32:15. > :32:18.companies, the ones spending on R & D, the ones that would like to be
:32:18. > :32:22.training workers and spending on human capital, are often penalised
:32:22. > :32:28.by financial markets. That needs to be rebalanced. I would state that
:32:28. > :32:35.both the US and the UK have been the countries most affected by the
:32:35. > :32:39.short run financial. This is an old complaint, America is so big and
:32:39. > :32:43.has such big expenditure in NASA and defence industries, they have
:32:43. > :32:47.huge Government support, eclipsing anything we could do. The important
:32:47. > :32:52.issue about rebalancing, is leadership in the big English
:32:52. > :32:55.cities, and in the statement today, the Chancellor referred to the
:32:56. > :33:00.coming mayors who are going to give a leadership to our English cities,
:33:00. > :33:06.that is long overdue. We have to break this Government monopoly in
:33:06. > :33:10.Whitehall, where every decision is taken there. When we did the report
:33:10. > :33:13.about Liverpool, the exciting thing was when we went to Liverpool and
:33:13. > :33:18.listened, it was alive with people who had ideas and projects. What
:33:18. > :33:22.happens today, the Chancellor stands up, we will back the
:33:22. > :33:27.Atlantic Bridge in Liverpool. are saying cause and effect? Not at
:33:27. > :33:30.all. But a lucky coincidence. Everyone obviously supports the
:33:30. > :33:34.Chancellor's statement about the infrastructure projects, you would
:33:34. > :33:38.be crazy not to. Is that a strategy for growth? I think that was more a
:33:38. > :33:42.guilt trip, the fact it had been cuts, cuts, cuts, theyn't waed to
:33:42. > :33:45.spend, but he did nothing, in fact, to show we were going to create the
:33:45. > :33:51.kind of opportunities that are currently driving growth, before
:33:51. > :33:54.the contagion occurred, in countries like Germany, China,
:33:54. > :34:00.Brazil. There weren't a lot of laughs in what the Chancellor had
:34:00. > :34:02.to say today, there were a lot of fiddley little initiatives,
:34:02. > :34:08.characteristic and reminiscent of the last Prime Minister. Gordon
:34:08. > :34:14.Brown went on from the Chancellorship to inher rite it
:34:14. > :34:18.from his called ally, -- inher rite it from his called friend, Tony
:34:18. > :34:21.Blair. George Osborne spent five years
:34:21. > :34:26.sloging away as Shadow Chancellor, before finally getting his hapbtdz
:34:26. > :34:29.on the prize, does he owe more to one of his predecessors than he
:34:30. > :34:35.would like to admit. It was Gordon Brown through and through,
:34:35. > :34:40.everything leaked in the past. Full of gizmos and flashy little schemes
:34:40. > :34:45.that subsidise this and tax relief that, and complicate that. He is
:34:45. > :34:49.repeating all the flaws of Gordon Brown. Perhaps not so you are
:34:49. > :34:53.surprising, both men have combined the job of Chancellor with being
:34:53. > :34:57.their party's best political strategist. George Osborne shadowed
:34:57. > :35:02.Brown, picking up some of his tricks and maybe some bad habits.
:35:02. > :35:07.In two years of being shadowle cha, he has made no progress in
:35:07. > :35:11.developing an economic policy. He cannot tell us. Familiarity breeds
:35:11. > :35:16.contempt. But the younger man hopes to follow in the footsteps of the
:35:16. > :35:20.younger one from the Treasury to Number Ten. Brown buried all his
:35:20. > :35:23.potential rivals, Osbourne is shaking off a persistent challenger,
:35:23. > :35:29.another reason why his pronouncements need to be vote-
:35:29. > :35:33.winning ones. I noticed Ed Balls was having fun teasing Mr Osbourne
:35:33. > :35:41.about the ambitions of Boris Johnson, clearly the other big
:35:41. > :35:43.rival for the leadership in 2020. That is a long way in advance. The
:35:43. > :35:51.personal relationship between Prime Minister and Chancellor is much
:35:51. > :35:56.better than when under Tony Blair and Gordon Brown. George Osborne
:35:56. > :35:59.did manage to sugar the pill, a bit for high-tech research here,
:35:59. > :36:05.something for families there. Those of the hard working variety, of
:36:05. > :36:09.course. Some wonder whether as Gordon Brown listened, such
:36:09. > :36:12.pronouncements might have left him flushed with pride. If he was
:36:12. > :36:18.watching the budget he would have switched off and thought the young
:36:18. > :36:21.kid learned a few tricks from him afterall. The way you dished out
:36:21. > :36:26.goodies to everybody around, you rushed through the bad news and
:36:26. > :36:31.lingering on the good news. It did seem like a conservative cover
:36:31. > :36:34.version of the song originally sung by a Labour Chancellor. I am one of
:36:34. > :36:37.those hoping we get a different track all together. Many of the
:36:37. > :36:41.spending announcements were drip- fed to the media over the last week.
:36:41. > :36:48.Because they were news, they were given more prominence than perhaps
:36:48. > :36:51.they deserved. That was often few the day after a Gordon Brown
:36:51. > :36:55.economic -- true the day after a Gordon Brown economic statement, we
:36:55. > :36:59.will know tomorrow if it is equally true of a George Osborne one.
:36:59. > :37:04.Looking at the Treasury building, you see a glaring illustration of
:37:04. > :37:08.the difference between the two men. Gordon Brown, who had this building
:37:08. > :37:13.refurbish, was a Chancellor in the time of plenty. George Osborne is
:37:13. > :37:16.Mr Austerity, whether he likes it or not. George Osborne,
:37:16. > :37:20.conspicuously, says he was not increasing or decreasing the public
:37:20. > :37:24.spending total for this parliament. What he has done is to move
:37:24. > :37:29.spending around within that constant spending limit. I think
:37:29. > :37:33.when you look at it, the differences between Brown and
:37:33. > :37:37.Osbourne, are greater than the similarities. If the amount of
:37:37. > :37:41.money is being spent is the same, don't all these little
:37:41. > :37:45.announcements of an extra billion here and there, start to give a
:37:45. > :37:48.misleading impression? No, I think it depends what you spend it on.
:37:48. > :37:52.Gordon Brown used to spend money we didn't have, George Osborne has
:37:52. > :37:56.said, for the first two years of the next part, if he's Chancellor,
:37:56. > :38:00.we will -- Parliament, if he's Chancellor, we will see real term
:38:00. > :38:04.cuts in spending, we haven't seen that in parliament. A very strong
:38:04. > :38:06.message George Osborne is giving. Not the kind of honesty we got from
:38:06. > :38:10.Gordon Brown. George Osborne knows the list of Chancellors who have
:38:10. > :38:14.made it to Number Ten is short. The list of those who have been a
:38:14. > :38:17.success as Prime Minister even shorter.
:38:18. > :38:23.Now to chew over today's disclosures and in the problem vain
:38:23. > :38:26.hope of spotting a pound coin at the bottom of the sceptic tank. Are
:38:26. > :38:30.Lionel Barber editor of the Financial Times, Tracy Corrigan
:38:30. > :38:36.editor of the Wall Street Journal, and Phil Collins, who writes
:38:36. > :38:43.editorals for the Times and wrote speeches for Tony Blair before that.
:38:43. > :38:48.Do you see similarities between Osbourne and Brown? When you talk
:38:48. > :38:53.about halving the tolls of the Humber Bridge there is echos of
:38:53. > :38:57.Gordon Brown. When he talked about retarring the A3 0 3 and others it
:38:57. > :39:02.was hill tear laws. The fact that George Osborne thought he would be
:39:02. > :39:05.standing a year ago talking about road works he would sponsor is
:39:05. > :39:09.incredibly. Fatastically funny, I thought.
:39:09. > :39:14.We are into a new era of politics, aren't we, after what we heard
:39:14. > :39:19.today? Except that seven years of pain and the word "austerity" will
:39:19. > :39:23.be knocking around a long time. Probably the big difference, Jeremy,
:39:23. > :39:28.is a plan, which was set out to eliminate this deficit, structural
:39:28. > :39:34.deficit, by the end of parliament, has now proven to be impossible, we
:39:34. > :39:39.will suffer for another two years. In that sense, this is Brownian
:39:39. > :39:44.motion here, he has adapted, he had to adapt his plan to react to the
:39:44. > :39:47.reality. Are you going to try to trump that simile? I don't think I
:39:47. > :39:51.can. This Government will be in a difficult position to fight the
:39:52. > :39:54.next election. The challenge for Labour is to really argue the case
:39:54. > :40:00.that we would be in a substantially different position if their plan
:40:00. > :40:04.was in place. Although Ed Balls was feisty as ever today, he was, you
:40:04. > :40:11.know, the argument that we should have had fewer spending cuts, but
:40:11. > :40:20.still be some how cutting borrowing more effectively, was quite hard to
:40:20. > :40:23.get across. Did we learn a lesson about the impotence of Governments
:40:23. > :40:25.all over? Absolutely, no more so than the European Governments.
:40:25. > :40:30.However difficult the position of our own Government at the moment,
:40:30. > :40:34.it is a lot less trickery than the French, the Germans or the Italians.
:40:34. > :40:38.There is a few political things in here which will be important. The
:40:38. > :40:43.huge loss of public sector jobs, a public sector pay freeze again, and
:40:43. > :40:47.the reduction to tax credits. They will show up in people's lives, and
:40:47. > :40:51.eventually in the Tories' poll ratings, those things are slow burn
:40:51. > :40:54.but important. The central claim of the Tory modernising is we are all
:40:54. > :40:58.in this together. It is a lot harder to uphold that claim when
:40:58. > :41:02.you are making cuts of that nature. It is very difficult. So
:41:02. > :41:05.politically, there are some things hidden in here which will be very
:41:05. > :41:09.difficult for the Tories. It is incredibly difficult, because
:41:09. > :41:12.growth is so anaemic that you have no tax revenues. You need the money
:41:12. > :41:17.from somewhere. Who knows where it should have come from. That will be
:41:17. > :41:21.difficult for them politically. Labour can attack them on that
:41:21. > :41:25.flank. The other point I would add, this came out in the programme
:41:25. > :41:30.tonight, is the Liberal Democrats, at least through Danny Alexander,
:41:30. > :41:35.have signed up to those two extra years of public spending. He was
:41:35. > :41:42.unambiguous, I was astonished, frankly, weren't you? I was
:41:42. > :41:46.astonished he was so unambiguous about it? I think you bagged a big
:41:46. > :41:51.tiger there Jeremy. Politics has changed, the whole environmental
:41:51. > :41:56.issue? We are in a very difficult situation. There is one patrol Len,
:41:56. > :42:02.of course, before 2007 -- Parallel, of course, before the Lehman
:42:02. > :42:06.brothers crash in 2007. External events are largely driving what is
:42:06. > :42:10.happening here, sub-prime crisis and now the euro crisis. This is
:42:10. > :42:14.the dominant factor now. If you look at Britain's borrowing costs,
:42:14. > :42:20.they are much lower than Italy's. The Chancellor pointed this out,
:42:20. > :42:29.eventhough Italy has a much higher deficit. If you get this wrong,
:42:29. > :42:32.credibility earned can easily be lost. You two in particular know
:42:32. > :42:36.the world of rating agencies and how the markets view Governments.
:42:36. > :42:44.You know it well. What will they make of this, there is a lot riding
:42:44. > :42:48.on it? Let's separate the markets from the ratings agencies. They got
:42:48. > :42:54.-- they have some bad calls there. Shouldn't we care about it? We care
:42:54. > :42:58.about the way the bond market works and how the bond market evaluates a
:42:58. > :43:01.Government's credibility. I think, therefore, the Chancellor was quite
:43:02. > :43:07.right to measure his language to stick to the course. We have said
:43:07. > :43:10.that in tomorrow's paper. To confuse the message, to abandon the
:43:10. > :43:15.austerity programme would have been extremely dangerous.
:43:15. > :43:21.I think it is easy to criticise him for having only made marginal moves
:43:21. > :43:25.at the edges, that is all he had room to do in order to keep to the
:43:25. > :43:29.brief that the austerity plan had set. I think that was necessary to
:43:29. > :43:34.convince investors to continue to buy our bonds. What is your sense
:43:34. > :43:39.to how European Government also regard to what we heard today?
:43:39. > :43:42.think that European Governments aren't bothered, they have too much
:43:42. > :43:46.else to worry about what is happening here. When they look over
:43:46. > :43:52.here they probably do so with envy, we are in a considerably better
:43:52. > :43:59.situation than they are. I thought, from what he had to say
:43:59. > :44:05.about the public sector job cuts, for example, the pay freezes, the
:44:05. > :44:09.retirement age and the advancing there of. It looked to me if this
:44:09. > :44:14.was would be an unhappy country for years to come? It will be, it will
:44:14. > :44:16.be difficult for them. He prefigured that, at the end of the
:44:16. > :44:20.speech there was an interesting little question where he changed
:44:20. > :44:23.the measure of success. It is no longer about the destination we are
:44:23. > :44:28.getting to. Cutting the deficit entirely in four years, it is about
:44:28. > :44:31.the journey, going in the right direction. He's setting us up for a
:44:31. > :44:37.general election which will be we have almost cleared up the mess, we
:44:37. > :44:42.have made progress, don't let those other guys get back in there.
:44:42. > :44:49.it make life difficult for Labour? It does because they lack
:44:49. > :44:54.credibility on the central economic yes. -- Question. Osbourne cleverly
:44:54. > :45:00.managed to pin on Labour the whole of the notion that the debt is
:45:00. > :45:06.their fault. It is not true, the external factors were important in
:45:06. > :45:09.the building up of the problems in the first place. Labour has lost
:45:09. > :45:12.that argument, it is losing it all the time. Whether or not pauls
:45:12. > :45:17.Balls is right is no longer important, because Labour doesn't
:45:17. > :45:21.have credibility on it. I still think, that unless there is some
:45:21. > :45:27.other crisis and totally blows away everything we have said, that is
:45:27. > :45:31.entirely possible, given where we are. The political fall-out on this,
:45:31. > :45:35.Osbourne will stumble along. This is predicated on the notion we will
:45:35. > :45:39.have some sort of growth. It is possible that we won't be able to
:45:39. > :45:44.stagger along with just under 1% growth for the next year or so, and
:45:44. > :45:47.we will go into recession. In which case there is nothing to have to be
:45:47. > :45:54.even less room for manoeuvre in the run up to the next election. Then
:45:54. > :46:01.all bets are off? They are, but we should draw attention to the very
:46:01. > :46:05.pessimistic forecast by the new independent body, the office of
:46:05. > :46:08.budget responsibility, populated by a former tabloid journalist. These
:46:08. > :46:16.are very pessimistic, what they spell out is the capacity in the
:46:16. > :46:23.economy, where we thought we would have been in 2015, 13% of GDP lost,
:46:23. > :46:29.this is really why, as my colleague from tomorrow's FT, is talking