29/11/2011 Newsnight

Woe, woe, thrice woe, Government policy is hurting but so far it is

not working. The British economy is in worse pain than any time in

recent memory. According to the Chancellor of the Exchequer, there

is no alternative, in fact, even more of the same. Promises of

quick-fixes and more spending this country can't afford, at times like

this, are like the promises of a quack doctor selling a miracle cure.

quack doctor selling a miracle cure. We do not offer that today.

So, Paul, is this advance surgery, or death by a thousand cuts?

don't know if it is the medicine killing the patient, but something

has radically altered the prognosis for British growth. I will be

asking the chief secretary to the Treasury, why, after 18 months of

failure, we should give the Government six more years to do

what they promised. George Osborne is now borrowing even more money

than Gordon Brown's Government did. Do the similarities go yet further?

What ought the Government to be doing when we are all in such an

Rotten growth, rising unemployment, longer to work until you can retire

and on top of all that, billions more required in borrowing. Plan A,

to sort out the economy, hasn't worked. The promise to balance the

books by the next election is dust, so the answer is, more of plan A,

and keep your fingers crossed, because if the eurocrisis gets

worse, the promise is recession. First tonight, David Grossman

reports. This was never going to be a feel-

good classic. George Osborne was always unlikely

to make it on to any greatest hits collection. Who could forget Gordon

at his growly best with PBR2006. Who can forget, the tenth

consecutive year of economic growth. They don't write them like that any

more. As the present Chancellor left for the Commons, much of the

softening up had been done. Many of the new measures announced today,

designed to create growth had been pre-briefed. Why? Well he knows

today those measures just can't compete with the grim news, that

the economic hole we are in, is far deeper than previously thought.

OBR today has shown new evidence that an even bigger component of

the growth that preceded the financial crisis was an

unsustainable boom, that the bust was deeper and had an even greater

impact on our economy than previously thought, and the result

of this analysis is that the OBR have significantly reduced their

assumptions about spare capacity in our economy, and the trend rate of

growth. This increases their estimate of the proportion of the

deficit that is structural. In other words, the part of the

deficit that doesn't disappear, even when the economy recovers.

it gets worse. Not only is the hole bigger than the official

predictions told us, growth, the engine, that will help fill that

hole, is going to be far slower than predicted. Way back in 2010,

growth for this year was predicted to be 2.3%, what do you know, it

has tumbled down to just 0.9%. Back then they told us growth for 2012

would be 28%, in the new charts it is in at 0.7%, ouch! But the

biggest climber, borrowing, up an extra �100 billion on the old

credit card over the next four years. As you might expect, Labour

see this as evidence that the coalition made the wrong call on

the economy. The Chancellor's entire economic and fiscal strategy

is now in complete disarray. And yet all which get are excuses.

Blaming anyone and anything, the Labour Government, the snow, the

royal wedding, the Japanese earthquake, higher inflation, VAT,

the eurozone. Low paid, low paid dinner ladies and Teaching

Assistants, anybody but himself Mr Teaker -- Mr Speaker. When it is

the Chancellor to blame, it is his failing plan that has pushed up

unemployment and pushed up borrowing. It is his reckless

gamble that has made things worse here in Britain, not better.

question then, what does the Government plan to do about this

new, bigger hole? First, the relatively easy changes, the

Chancellor announced slower growth in the overseas aid budget, to keep

it at 0.7% of GDP, the rest gets much harder, however you try to

spin it. Not quite a non-mover, public sector pay rises will be

limited to 1% for an extra two years. A surprise climber, the

pension age rising to 67 in 2026. Neither of these changes will be

softening the resolve of public sector union, they go on strike

tomorrow. Nor will the OBR forecasting 7 10,000 public sector

workers losing their jobs. That forecast sup from 4 Hunniford,000

in March? I found it incred -- I found it incredible the attacks on

the public sector workers, they have been through a two-year pay

freeze with inflation through the roof, food prices up 8%, yet their

pay has been held back because of the failure of the banking system,

nothing to do with themselves. Institute for Fiscal Studies is not

known for employing excitable hot heads, when they find something

remarkable, we should perhaps listen. As a result of the dramatic

changes in the growth forecasts, we will have another two years of

spending cuts, big spending cuts after the next election, after five

years of big spending cuts we will have seven years of spending cuts.

Same level in 2017 as we have had in this parliament. How does that

compare historically with previous fiscal contractions? We have been

pointing out five years of spending cuts is more than we have ever

managed before, seven years even more, this is historically

unprecedented. Not only has the economics of the deficit changed,

so has the politics. The central plank of the Government's economic

plan was to deal with the nasty, difficult business of cutting the

deficit by the time of the next general election. Allowing both

parties to go to the country, having claimed to have dealt with

the nation's financial problems, but offering a sunnier, more

optimistic prospect for the future. Now, they are going to have to

offer more pain. Remember, all this dreadful

economic news is predcated on hoping for the best in the eurozone,

assuming they manage to avoid catastrophic meltdown. If that

happens, we could look back on today's numbers as wild, crazy

optimisim. We will see you back in March 2012 for the Budget, those

numbers could have tumbled again. Paul Mason is here. How important

is the downgraded growth? It is huge, because on day like today,

you do want to know when are things getting back to normal. You want to

know when do we balance the books. On both those questions the

Government has just severely missed what it thought was going to happen.

Let's have a look here at the world that the coalition thought it would

be presiding over. Five years of recovery, start anything 2010, 2%

growth, then rising to 3%, falling back a bit, you glide into the next

election with that as your record. This is the reality, The Office

showed to them today. That red -- the office of budget responsibility

showed them today. The red line, we are lucky if we are not already in

a recession and flattening out. In the gap between reality and

aspiration is a whole bunch of political pain for the Government.

Will they ever meet fiscal targets? They have done it by moving it back

a year, and by adding another �30 billion on to austerity. This is

the austerity we knew. David was talking about in the report there,

with the guy from the IFS, this is the next four years of the

coalition Government. Just to have any chance of balancing, of meeting

the target they set themselves, the fiscal mandate, they have had to do

this, adding an extra �30 billion, by 2016, to the austerity. The

problem for them there is, these last two years are after the next

election. It rather begs the question. George Osborne might be

signed up to this, and large parts of the Conservative Party might,

but the Liberal Democrats I'm not sure whether they thought that was

in the coalition agreement. To go into parliament number two with the

biggest fiscal austerity programme ever. So you have got the ratings

agency saying this stuff leaves you with almost no room for manoeuvre,

you need to watch it in terms of sovereign debt crisis. George

Osborne has responded, he has his retaliation in first, saying the

facts changed, I changed my mind, I will do more austerity.

George Osborne's righthand man is the Liberal Democrat chief

secretary to the Treasury, Danny Alexander. He is here, welcome. So

you are accepting that plan A hasn't worked? No, I don't accept

plan A hasn't worked. What I do accept very much is what Paul has

just set before us, which is that for a whole range of reasons that

the OBR set out today, growth is slower and it will take longer to

meet the goals we set out. Plan A was going to balance the books

within this parliament, you are clearly not going to do that?

built in considerable flexibility in our plans when we set them out.

Let me explain. The promise was to do it in the parliament? We set out

a fiscal mandate to balance the fiscal deficit over a five-year

period, the OBR said we will do that today. We set to get the whole

of the UK debt falling by 2016, the OBR say we will achieve that,

against the background of crisis in the eurozone, rising commodity

prices, and also they told us today that the size of the crisis we saw

a few years ago was worse. didn't hear what David Cameron said

about balancing the books by 2015. Let me ask you this. If austerity

hasn't brought results in the time he predicted, why is the answer

more austerity? We need to make sure we retain something very

important to this country, achieved by this coalition Government, the

credibility of the fiscal plans, which has helped to ensure we have

very low interest rates in this country. That benefits individuals

with their mortgages and businesses with their loans. If you go back to

April 2010, you will see that Britain's long-term interest rates

are actually slightly higher than Italy, for example, now there is a

much bigger gap the other way, precisely because this coalition

plans have credibility. No other cuts guaranteed within this

parliament? We are sticking to the plan. You can't do that, because

you have a caveat elsewhere? David explained, we are rolling

that forward for a further two years, in order to make sure we

deal with the structural deficit we inherited. If there is another

crisis which you are already blaming your difficulties on

external factors, if will are further external factors there will

be further cuts? The OBR presented an analysis of the deterioration.

You can query them on the analysis they have put out, but clearly the

crisis in the eurozone is a major problem for the UK too. It is our

major trading partner. I was merely asking you what you would do if

further circumstances of a similar kind happen in future. I note you

don't want to answer that. Let me ask you this, factually, of the

cuts announced, �30 billion additional cuts, �.2 billion, �1.2

billion comes from changes to the tax credit system, where does the

other �28.8 billion come from? will be found in 2016/17, in good

time, well before the next election, we will set out the measures to

deliver the additional savings in the next parliament. You haven't

decided where to find �28.8 billion? No. We have conducted a

Spending Review, that set out the details of our cuts for this

parliament. We have just decided today what the path of spending is

in the following two years, and in due course we will set out what

that means in detail. You are going into the next election, promising

further billions of pounds in cuts in public spending. That is what

you are going to say in your manifesto in the next election?

afraid so, yes. I thought your promise was that in the last year

of this Government, you would not necessarily be giving unequivocal

endorsement to every Government policy? As a Government we

originally, as you said earlier, set out plans that would meet our

targets a year early, in 2014, 15, because of the economic

circumstances have deteriorated, we need to make the commitment for

future years. Liberal Democrats and Conservatives will work together in

Government, to set out plans for those following two years, and of

course we will both be committed to delivering them. What is the point

of voting for you as opposed to the Conservatives then? There are lot

of points to vote Liberal Democrats rather than Conservative. Those are

things we will set out at the general election in our respective

manifestos. Let's take the most potent example? That is not written

yet. You will be telling us we have to save another �0 billion some

where or other. Let's take the most topical answer, what was announced

today by the Chancellor of the Exchequer, what was not in the

proposal, which the Tories wanted to put in, and you in the Liberal

Democrats kept out. Which proposal are you talking about. The Autumn

Statement today, all the plans for cutting public spending to get the

economy back on track, what did the Tories want to put in there that

you the Liberal Democrats kept out? We had lots of debates within the

Government. I'm not going to air those debates in public. We agreed

all the measures in today's Autumn Statement. Precisely for the

reasons that I have said. We have not yet set out the precise measure

that is we will take in the next parliament to balance the books.

I'm discussing what happened last week? We need to retain the

credibility we have. What credibility do you have if you

can't tell us there is a single measure you kept out of the Autumn

Statement as a consequence of you being in Government? I'm not going

to get into airing discussions and debates that took place within the

Government. Was there anything? There were lots of discussions and

debates about what we might do. there nothing, saying as a Liberal

Democrat, I will keep that out? There are plans for investing in

infrastructure, transport, broadband, to get the economy

stronger for the long-term. As well as the fact we have taken steps

that retain the credibility, that delivers the low interest rates,

that matter most to people, low interest rates that we put at risk

if Labour's alternative was put in place in this country. When you

listen to George Osborne today, did you think, that sounds like Nick

Clegg? Of course I don't think that. I think there is the Chancellor of

the Exchequer, who I work closely with in the Treasury, setting out

the agreed Government plans for the economy, over the next few years.

That is the right and proper way to go p it. What about job losses,

there is a further 200,000 jobs lost in the public sector, have you

decided who will lose their jobs? As the OBR says in its report,

those figures are based on un-- are facing a lot of uncertainty. They

are based on assumptions that the OBR makes that all of the further

cuts in the future years you are referring to are cuts to

departmental budgets. There are other ways of makes those cuts, I

would treat the figures with a degree of caution, as the OBR says.

For this plan to work, there has to be no crisis within the eurozone?

As the OBR says, the phrase they use is "the eurozone struggling

through", to meet these plans. Of course, there is a huge amount of

uncertainty because of the eurozone crisis. If the eurozone doesn't

resolve its problems that could have a serious knock-on effect for

the UK economy. We have to hope it doesn't happen? We are working with

the Government and European partners to make sure it doesn't.

Rachel Reeves, you are the Shadow Chief Secretary to the Treasury.

You are not going to sit there and tell us had they followed Alistair

Darling's plan, there would have been growth at 3% or something, are

you? Whoever was going to be in power after the last election would

have had to make tough decisions about tax and spending. And a lot

of cuts? What happens in the eurozone will have huge

implications for British families. Have you a sense of how it might

have been if you had won the election? We had set out a deficit

reduction of halving it over the parliament. The Government took a

gamble to cut as far and fast as they did, that has choked off

economic recovery. You know perfectly well the Office for

Budget Responsibility said today the reason for the problem with

growth was nothing to do with these plans. It was to do with energy

prices and world commodity prices? The economic stagnation, the

flatlining economy, started in Britain well before the eurozone

crisis. A year ago the Government. I didn't mention the eurozone

crisis they don't mention it, they mention energy prices and world

commodity prices? Of course those things put up inflation. But the

flatlining economy started a year agoful the Chancellor then blamed

the snow. Then he blamed the royal wedding, because of the extra bank

holiday, now he's blaming Europe. At some point the Chancellor has to

take responsibility for his own actions. It was his poll assist

decisions that choked off economic recovery here in Britain. Let me

ask you another factual thing, you saw the figures today, an extra

�111 billion of borrowing over the next few years. How much greater

would it have been if we followed your alternate Government plans?

believe, because the Government have choked off growth, you get

rising unemployment, you are paying more out in benefits, and you are

getting less in taxes because more businesses are failing. The extra

borrowing, the �158 billion extra since last year, is the cost of

economic failure. If you half the budget deficit over this parliament,

slower rate of budget deficit reduction, then your growth would

have continued, unemployment wouldn't have reached the peaks it

did. You are saying there would have been no more borrowing, you

are not really saying that are you? I honestly believe if you had a

more balanced plan for deficit reduction, growth would have kept

going, unemployment wouldn't have risen to the levels it has risen,

and we are paying more because of economic failure, unemployment

benefits are going up. What do you make of that? It is incredible, the

plan set out by the previous Government would have added at

least another �100 billion to the borrowing figures we saw today, the

thing we haven't heard from the Labour Party at all is any of the

spending cuts that were put forward already in this parliament, or the

tax rises they support. Not only do it. You it put it directly to her?

I would love to hear any spending cut we are putting forward that

Labour Party supports. Right now your position is we can't have any

austerity. Everything we put forward you object to. It would be

nice to hear one spending cut you support. On police cuts, we said we

would support cuts of 12% over this parliament, compared with the 20%

cuts the Government have put forward. We recognise the need to

be cuts, we recognise the need for tax increases, we would do it at a

slow rate. Those are the choices we would make. If you look at the

Government spending plans and borrowing now, it will be �37

billion. She has given you -- billion higher than Alistair

Darling. You just asked for one. She did give you one. 18 months

into this parliament, and the Government need to start taking

responsibility for its own actions. Because we're borrowing �158

billion more compared with a year ago, because unemployment is rising

and businesses are failing. I do take responsibility for our actions,

and I accept this country has very, very serious economic problems.

Those serious economic problems require a Government that is

capable of taking the tough decisions to secure our economic

credibility, to deliver the low interest rates this country needs,

and your plan is one that would lead to more borrowing, more debt,

higher interest rates. Ed Balls yesterday on the radio said he

thought low interest rates were a sign of failure, he wanted higher

interest rates, which would cause people to have more expensive

mortgages and businesses to fail. One million young people are out of

work, 2.6 million people out of work. That is now projected to

increase into next year. So those are the decisions you have made.

Those are the consequences of your decisions. The other consequence is

you are borrowing more to pay for the benefits. One of the things I

agree with you is the importance of youth unemployment. As a Government

and Liberal Democrat, I don't want to see people scarred by

unemployment, so today we announced another billion pounds for aout

unemployment programme so every 18- 24-year-old will have access to a

job or training place. 18 months ago you scrapped the Future Jobs

Fund. That is because it was an expensive failure. You have already

let down so many young people. Youth unemployment, long-term, is

up 80% since the start of the year. Decisions you made are causing

youth unemployment to rocket. know the Future Jobs Fund was an

expensive failure. Why are you reintroducing a pale imitation.

growth for this country is plan you put forward to destroy this

country's economic credibility and lead us to higher interest rates.

Can I come across this, we are running out of time. Do you support

the public sector workers' strike tomorrow? I think the strikes are a

sign of failure. I'm not going to support a strike. So you don't

support the strike? I don't, because it is a sign of failure.

But the Government...That Is the Labour Party's official policy, you

do not support the strike? We don't support the strike because it is a

sign of failure. We think the Government needs to give something

more, to low-paid public sector workers. They have seen today their

pay will be frozen for another two years. Your opinion tomorrow, it is

OK to strike, we can't support you, but we think it is a demonstration

of failure? We understand why they are striking, effectively, low-paid

public sector workers are having a 3% tax increase because of the

increased contributions. We think a strike is a failure. We want the

Government, we understand why they are striking, it is a tax increase

on public sector workers. There is only one word for the predicted

rate of growth for the economy, that is rubbish. 1% next year, only

this spring it was predicted at 2.5%. No more glad, confident

morning, hello the endless morning after. Gordon Brown may have talked

nonsense about having eradicated boom and bust, now it is just bust,

sometimes it is difficult to tell the difference between them. Paul

Mason has what we have to look It will be all right eventually,

that has been the message from George Osborne since he came to

power. One day the UK will recover, and with the private sector driving

the growth. But that bright tomorrow is getting further and

further away. At the centre of the Government's

recovery plan was rebalancing, from state spending and credit-fuelled

consumption, to a future based on factories, ports, exports. So

what's happened to that? I think the objective of rebalancing is

absolutely right, indeed it has to happen. But so far there is next to

no sign of it whatsoever. The external environment has massively

deteriorated, hopes for a strong recovery have been dashed by events

on the continent and around the world. Meanwhile companies aren't

increasing their investment, if anything they are set to cut it

back. There was supposed to be two

drivers of rebalancing, more business investment, and more

exports. Today the Government's own watchdog said we probably had the

bulk of that effect already. Recent data revisions suggest that exports

have picked up more already in response to the weakness of the

pound than previously thought. So there is less of a boost still to

come interest this quarter. In the case of business investments, we

think firms may have less cash available to invest than we

previously thought. Another thing we learned today, about the future,

is it will be more austere. The cuts will go on long after the 2015

election. And those who advocated slashs back the state to boost

growth are delighted. I think this is beyond anything we have an

experience of before this particular recession. So the scale

of cuts we are talking about here is going on for six years of

continuous cuts. We are achieving something like �116 billion of cuts

by the end of the period, in spending. �147 billion cuts in the

total deficit. This is absolutely extraordinary, unprecedented.

The huge variable now is what happens in Europe. If the continent

drifts towards default and euro exits, that could mean the

difference between light at the end of a tunnel for Britain and the

tunnel collapsing. A further euro blowout could lead to raising of

GDP and enormous spending cuts and rising taxes.

The economic future right now howevers somewhere between the

controllably austere and euro catastrophy. However clier the goal

of a rebalanced Britain, it will be impossible to achieve in an

unbalanced world. Where can we expect growth to come

from? One for the former Conservative cabinet minister, Lord

Heseltine, who heads the Government's Regional Growth Fun,

and our guest from the science policy research unit, and author of

the The Entrepreneurial State. People seem to say, gosh this is a

bleak picture today, did you see it as such? It is a bleak picture. We

didn't need the Chancellor to get up. We know Europe is stagnant, the

Middle East is in turmoil, and these are the markets that, in part,

we have to serve. So it is no surprise, that we have got a very

difficult situation. The issue is what should the Government do. In

my view the Chancellor's statement was one of the best of its sort I

have listened to. For this reason, for as long as I have been in

politics, the policy has to be overconsume and underinvest, to

hear a Chancellor say we will boost the investment about the long-term

improvement of Britain's competitiveness, even in the harsh

circumstances was courageous and right. Were you impressed? I was

much less impressed. Because I absolutely agree we need to

increase business investment, business is currently hording lots

of cash, �75 billion is horded not spent. How do you do it? We needing

to back to economic they arey. It is not enough to say increase

investment. What drives investment is understanding where new

technological opportunities are, it is not small measures, little

bandages here and there, infrastructure projects, some

apprenticeships, some enterprise zones. Why did Pfizer leave

Sandwich Kent, they didn't go to a low-cost tax haven, they went to

Boston, an expensive part of the US, with huge state investment in

universities and schools, especially national laboratories.

NIH funding is what drives where farm ma is going. Your argument is

Britain should be doing something similar? Absolutely. The scale is

wrong? The scale and signals are wrong. I don't think she heard the

statement. The Chancellor talks about looking at the opportunity of

the third London airport, he talked about the Atlantic Bridge in

Merseyside. He talked about a billion pounds for the Regional

Growth Fun, of which I'm chairman. He talked about a billion worth of

investment funds in every aspect. Reignighting and getting British

Industry investing, the essence, if I may say so, is confidence, and

confidence is crucially dependant on maintaining low interest rates,

and a Government in control of the economy. Well, I listened to the

statement and there was missing an analysis of what the economy will

be. Every leading country, Germany, Finland, China, they are investing

massively in the environment. The main thing holding the Government

back, is the ideolgical position that all Government can do is fix

things here but not drive economic change and growth. That isn't true,

they did broadband a massive incentive around broadband.

Anything around the green economy. There is a whole range of

Government policies to support the green economy. He didn't talk about

it. Look, the fact is, and I think we agree, this is not an industrial

strategy, this is an economic statement by the Chancellor. But it

begins with investment, it begins with private sector job creation,

and what he now has to do, I hope, is to turn this into a long-term

strategic industrial policy for this country. Yes, but many of the

measure that is you mentioned before were, in fact, just

repairing things they took away from the 2010 Spending Review.

simply isn't the case. A �1.7 billion cut in research. Today we

heard they will increase it by �200 million. Aren't you persuaded by

all the talk of rebalancing the economy. Doesn't that show the

Government is committed to investment in other areas other

than the financial sector? We have to define what we mean by

rebalancing. The main rebalancing that needs to be done is not so

much from the size of the financial sector, but from the short run

priorities, if you want, that the financialisation of the economy has

had on every single sector. The fact that the most innovative

companies, the ones spending on R & D, the ones that would like to be

training workers and spending on human capital, are often penalised

by financial markets. That needs to be rebalanced. I would state that

both the US and the UK have been the countries most affected by the

short run financial. This is an old complaint, America is so big and

has such big expenditure in NASA and defence industries, they have

huge Government support, eclipsing anything we could do. The important

issue about rebalancing, is leadership in the big English

cities, and in the statement today, the Chancellor referred to the

coming mayors who are going to give a leadership to our English cities,

that is long overdue. We have to break this Government monopoly in

Whitehall, where every decision is taken there. When we did the report

about Liverpool, the exciting thing was when we went to Liverpool and

listened, it was alive with people who had ideas and projects. What

happens today, the Chancellor stands up, we will back the

Atlantic Bridge in Liverpool. are saying cause and effect? Not at

all. But a lucky coincidence. Everyone obviously supports the

Chancellor's statement about the infrastructure projects, you would

be crazy not to. Is that a strategy for growth? I think that was more a

guilt trip, the fact it had been cuts, cuts, cuts, theyn't waed to

spend, but he did nothing, in fact, to show we were going to create the

kind of opportunities that are currently driving growth, before

the contagion occurred, in countries like Germany, China,

Brazil. There weren't a lot of laughs in what the Chancellor had

to say today, there were a lot of fiddley little initiatives,

characteristic and reminiscent of the last Prime Minister. Gordon

Brown went on from the Chancellorship to inher rite it

from his called ally, -- inher rite it from his called friend, Tony

Blair. George Osborne spent five years

sloging away as Shadow Chancellor, before finally getting his hapbtdz

on the prize, does he owe more to one of his predecessors than he

would like to admit. It was Gordon Brown through and through,

everything leaked in the past. Full of gizmos and flashy little schemes

that subsidise this and tax relief that, and complicate that. He is

repeating all the flaws of Gordon Brown. Perhaps not so you are

surprising, both men have combined the job of Chancellor with being

their party's best political strategist. George Osborne shadowed

Brown, picking up some of his tricks and maybe some bad habits.

In two years of being shadowle cha, he has made no progress in

developing an economic policy. He cannot tell us. Familiarity breeds

contempt. But the younger man hopes to follow in the footsteps of the

younger one from the Treasury to Number Ten. Brown buried all his

potential rivals, Osbourne is shaking off a persistent challenger,

another reason why his pronouncements need to be vote-

winning ones. I noticed Ed Balls was having fun teasing Mr Osbourne

about the ambitions of Boris Johnson, clearly the other big

rival for the leadership in 2020. That is a long way in advance. The

personal relationship between Prime Minister and Chancellor is much

better than when under Tony Blair and Gordon Brown. George Osborne

did manage to sugar the pill, a bit for high-tech research here,

something for families there. Those of the hard working variety, of

course. Some wonder whether as Gordon Brown listened, such

pronouncements might have left him flushed with pride. If he was

watching the budget he would have switched off and thought the young

kid learned a few tricks from him afterall. The way you dished out

goodies to everybody around, you rushed through the bad news and

lingering on the good news. It did seem like a conservative cover

version of the song originally sung by a Labour Chancellor. I am one of

those hoping we get a different track all together. Many of the

spending announcements were drip- fed to the media over the last week.

Because they were news, they were given more prominence than perhaps

they deserved. That was often few the day after a Gordon Brown

economic -- true the day after a Gordon Brown economic statement, we

will know tomorrow if it is equally true of a George Osborne one.

Looking at the Treasury building, you see a glaring illustration of

the difference between the two men. Gordon Brown, who had this building

refurbish, was a Chancellor in the time of plenty. George Osborne is

Mr Austerity, whether he likes it or not. George Osborne,

conspicuously, says he was not increasing or decreasing the public

spending total for this parliament. What he has done is to move

spending around within that constant spending limit. I think

when you look at it, the differences between Brown and

Osbourne, are greater than the similarities. If the amount of

money is being spent is the same, don't all these little

announcements of an extra billion here and there, start to give a

misleading impression? No, I think it depends what you spend it on.

Gordon Brown used to spend money we didn't have, George Osborne has

said, for the first two years of the next part, if he's Chancellor,

we will -- Parliament, if he's Chancellor, we will see real term

cuts in spending, we haven't seen that in parliament. A very strong

message George Osborne is giving. Not the kind of honesty we got from

Gordon Brown. George Osborne knows the list of Chancellors who have

made it to Number Ten is short. The list of those who have been a

success as Prime Minister even shorter.

Now to chew over today's disclosures and in the problem vain

hope of spotting a pound coin at the bottom of the sceptic tank. Are

Lionel Barber editor of the Financial Times, Tracy Corrigan

editor of the Wall Street Journal, and Phil Collins, who writes

editorals for the Times and wrote speeches for Tony Blair before that.

Do you see similarities between Osbourne and Brown? When you talk

about halving the tolls of the Humber Bridge there is echos of

Gordon Brown. When he talked about retarring the A3 0 3 and others it

was hill tear laws. The fact that George Osborne thought he would be

standing a year ago talking about road works he would sponsor is

incredibly. Fatastically funny, I thought.

We are into a new era of politics, aren't we, after what we heard

today? Except that seven years of pain and the word "austerity" will

be knocking around a long time. Probably the big difference, Jeremy,

is a plan, which was set out to eliminate this deficit, structural

deficit, by the end of parliament, has now proven to be impossible, we

will suffer for another two years. In that sense, this is Brownian

motion here, he has adapted, he had to adapt his plan to react to the

reality. Are you going to try to trump that simile? I don't think I

can. This Government will be in a difficult position to fight the

next election. The challenge for Labour is to really argue the case

that we would be in a substantially different position if their plan

was in place. Although Ed Balls was feisty as ever today, he was, you

know, the argument that we should have had fewer spending cuts, but

still be some how cutting borrowing more effectively, was quite hard to

get across. Did we learn a lesson about the impotence of Governments

all over? Absolutely, no more so than the European Governments.

However difficult the position of our own Government at the moment,

it is a lot less trickery than the French, the Germans or the Italians.

There is a few political things in here which will be important. The

huge loss of public sector jobs, a public sector pay freeze again, and

the reduction to tax credits. They will show up in people's lives, and

eventually in the Tories' poll ratings, those things are slow burn

but important. The central claim of the Tory modernising is we are all

in this together. It is a lot harder to uphold that claim when

you are making cuts of that nature. It is very difficult. So

politically, there are some things hidden in here which will be very

difficult for the Tories. It is incredibly difficult, because

growth is so anaemic that you have no tax revenues. You need the money

from somewhere. Who knows where it should have come from. That will be

difficult for them politically. Labour can attack them on that

flank. The other point I would add, this came out in the programme

tonight, is the Liberal Democrats, at least through Danny Alexander,

have signed up to those two extra years of public spending. He was

unambiguous, I was astonished, frankly, weren't you? I was

astonished he was so unambiguous about it? I think you bagged a big

tiger there Jeremy. Politics has changed, the whole environmental

issue? We are in a very difficult situation. There is one patrol Len,

of course, before 2007 -- Parallel, of course, before the Lehman

brothers crash in 2007. External events are largely driving what is

happening here, sub-prime crisis and now the euro crisis. This is

the dominant factor now. If you look at Britain's borrowing costs,

they are much lower than Italy's. The Chancellor pointed this out,

eventhough Italy has a much higher deficit. If you get this wrong,

credibility earned can easily be lost. You two in particular know

the world of rating agencies and how the markets view Governments.

You know it well. What will they make of this, there is a lot riding

on it? Let's separate the markets from the ratings agencies. They got

-- they have some bad calls there. Shouldn't we care about it? We care

about the way the bond market works and how the bond market evaluates a

Government's credibility. I think, therefore, the Chancellor was quite

right to measure his language to stick to the course. We have said

that in tomorrow's paper. To confuse the message, to abandon the

austerity programme would have been extremely dangerous.

I think it is easy to criticise him for having only made marginal moves

at the edges, that is all he had room to do in order to keep to the

brief that the austerity plan had set. I think that was necessary to

convince investors to continue to buy our bonds. What is your sense

to how European Government also regard to what we heard today?

think that European Governments aren't bothered, they have too much

else to worry about what is happening here. When they look over

here they probably do so with envy, we are in a considerably better

situation than they are. I thought, from what he had to say

about the public sector job cuts, for example, the pay freezes, the

retirement age and the advancing there of. It looked to me if this

was would be an unhappy country for years to come? It will be, it will

be difficult for them. He prefigured that, at the end of the

speech there was an interesting little question where he changed

the measure of success. It is no longer about the destination we are

getting to. Cutting the deficit entirely in four years, it is about

the journey, going in the right direction. He's setting us up for a

general election which will be we have almost cleared up the mess, we

have made progress, don't let those other guys get back in there.

it make life difficult for Labour? It does because they lack

credibility on the central economic yes. -- Question. Osbourne cleverly

managed to pin on Labour the whole of the notion that the debt is

their fault. It is not true, the external factors were important in

the building up of the problems in the first place. Labour has lost

that argument, it is losing it all the time. Whether or not pauls

Balls is right is no longer important, because Labour doesn't

have credibility on it. I still think, that unless there is some

other crisis and totally blows away everything we have said, that is

entirely possible, given where we are. The political fall-out on this,

Osbourne will stumble along. This is predicated on the notion we will

have some sort of growth. It is possible that we won't be able to

stagger along with just under 1% growth for the next year or so, and

we will go into recession. In which case there is nothing to have to be

even less room for manoeuvre in the run up to the next election. Then

all bets are off? They are, but we should draw attention to the very

pessimistic forecast by the new independent body, the office of

budget responsibility, populated by a former tabloid journalist. These

are very pessimistic, what they spell out is the capacity in the

economy, where we thought we would have been in 2015, 13% of GDP lost,

this is really why, as my colleague from tomorrow's FT, is talking