29/11/2011 Newsnight


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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


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