19/03/2014 Newsnight


19/03/2014

Budget coverage with Jeremy Paxman, Emily Maitlis, Chris Cook and Laura Kuenssberg. Plus the latest events in Ukraine and more details on the missing plane.


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Transcript


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how could it be when one of the biggest deals was the news of a new

:00:10.:00:16.

shape for the pound coin. In three years time. But there was comfort

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for older people and grand claims about how the economy as a whole is

:00:21.:00:24.

recovering. We will be asking the Chief Secretary to the Treasury

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whether the budget's appeal to older people has anything to do with the

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fact that they are more likely to vote. His Labour shadow thinks the

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whole budget is a bit of a con. With the man described in one of the

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newspapers in all seriousness as the "pensions Superman" and we have

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convened the very muchable Trinity of the Newsnight -- venerable

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Trinity of the Newsnight political panel to pass their judgment on the

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budget. It is all going terribly well, take the Chancellor of the

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Exchequer's claims about the healthy state of the British economy with as

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much salt as suits your taste. Today's budget teach was a long way

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short of the most exciting ever delivered. But it is noticeable that

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a year out from an election wealthier, older people, the sort of

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people who vote benefitted most from tax changes. We will pick over the

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budget starting tonight, with Emily Maitlis's reading of the political

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tale. Seen from this angle perhaps we should have realised that a box

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that size in a year like this could never really have fielded that big a

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rabbit. But for a while this morning amongst the spring daffodils,

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Westminster village forgot the 2004 hunting act and raised in pursuit of

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that bunny. But it never entirely came. I think George Osborne felt he

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didn't need a huge populist rabbit, if you like. He's able to say the

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economy is in recovery, we're cutting people's income tax, we are

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helping people with childcare. We're getting the job done on the economy.

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What did it tell us? Growth is two. 7%, but it won't be matched in the

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years after and the deficit won't disappear until 2018. Whilst there

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was no fireworks there was radical reform. Aimed at the pensioner, the

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manufacturer and the worker? This is budget for the makers, doers and

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savers. Pensioners will have complete

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freedom to draw down as much or as little of their pension pot as they

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want any time they want, no caps, no draw down limit, let me be clear,

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no-one will have to buy an annuity. It is hard to ignore the voter

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targeted older, traditionally Tory, not badly off, also fits the profile

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of the putative UKIP voter. Not surprising that with elections

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looming a few sprinkled measures to entice that sort of vote back to the

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Tory fold. Here you will find no factory line,

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no noise, no men. Leave your preconceptions about manufacturing

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at the door. They make face cream here for sensitive skin and they

:03:33.:03:36.

export a lot. A business that Sarah Brown started in her own garage

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seven years ago, now with a turnover of ?1. Three billion. She welcomes

:03:41.:03:45.

the increase in capital allowance which has doubled. But, says the

:03:46.:03:49.

hurdles for exporters are still high. 50% of our business is coming

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from overseas, that's fantastic, we're hungry for more, we wa export

:03:55.:03:59.

more. But there are barriers to that. It is the emerging markets

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that excite us most, we want to get in first, Brazil is great example.

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There is a 40% import duty into that country. It is a closed market for

:04:15.:04:17.

us, the Government can help with that. What about the doers? They

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learned a salsa pretty young here, average age 12 weeks, and when their

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mothers aren't dancing they are working. That is if they are

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convinced it is worth it. It would probably cost me as much money

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putting her into childcare three days, if I go back to work three

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days a week, than it would if I didn't go to work. The Chancellor

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hopes his ?20,000 hand-out for childcare will convince her it is,

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an early leap from the budget, keen to put workers centre stage. When it

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came to a cap on the welfare budget at ?119 billion, the Chancellor

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offered a vote. A move that leaves Labour with an interesting dilemma.

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And then it was down to the more ease so esoterics winners. You

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couldn't wonder if it was a set up for the vintage George Osborne line.

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King John's defeat centuries ago scenes unimaginably distant, a weak

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leader who had risen to the top after betraying his brother. So how

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would Ed Miliband respond, not to that line, I mean to the budget as a

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whole. It is very simple, all the Prime Minister needs to do is to nod

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his head if he's going to rule out cutting 45p tax to 40p in the next

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parliament. Nod your head, come on, come on! There you have it. There

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you have it. There you have it, Mr Deputy Speaker. So not a response to

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the budget but a line he's used in the past. And the focus might have

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dwelt on that Labour response, were it not for the Tory advert which

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surfaced this evening. Commending the hard working beer drinkers of

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the bingo halls, labelled patronising and a bit Marie

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Antoinette. This is traditionally the time the you find the budget

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land mine, if things are going to unravel they do it now. The

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Chancellor and who knows a leader in waiting has been careful to avoid

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the traps, it seems, no splashy hand-outs, nothing that leaves him

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open to charges that austerity has thrown away. The move on pensions is

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big, but if he stayed away from more obvious pyrotechnic, a cut in the

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basic rate on national insurance, or a pushing up of the 40p, well

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there's a clear political reason behind that, against back drop of

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good growth figure, the Chancellor can't afford for things to look too

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rosy. The last message he wants is everything is fine, the job is done

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and they can pack up and go home. The economic picture painted by the

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budget was actually pretty cheery. Growth up and unemployment down. So

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are we out of the woods? Our policy editor has this health check on the

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state of the economy. Let's start with the good news, first of all,

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growth. Recent growth has been very robust and the OBR expects its

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previous estimates of how much the economy would expand in this year

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and next year are too low. It has revised them up. Now it has revised

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them down a little for the years after that, but even so, the news is

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broadly positive. Look at unemployment, the rate at which

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unemployment is expecting to fall is increasing. That is good news too.

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And have a look at wages and prices. The squeeze on living standards, on

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some measures now looks like it is going to reverse, people's real

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incomes are going to start to rise quite soon. But there are reasons to

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be worried about some of these projections. Economists have spotted

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some slightly troubling symptoms. For example some statisticians think

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there is very little slack left in the British economy. They think that

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the easy fast catch-up growth that a country usually gets after recession

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may already be over. In the jargon, they think that the output gap is

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already zero. The OBR, however, has assumed there is still a few years

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of that easy fast growth yet to come. The OBR also assumes that our

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growth is going to be Britain -- driven by demand. They have to

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assume that household also rack up the debt we haven't seen since the

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financial crisis. They also assume that businesses will pile in to

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investment, they think that the amount that they spend on kit is

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going to grow by 8-9% a year for the remainder of this parliament and

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into the next. That is a pretty bald assumption. We also suffer from a

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particular British disease. Our labour productivity, that is to say

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the amount of stuff our workers can make in an hour hasn't risen since

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2007. That is very, very strange it is also very troubling in the long

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run. It is productivity that determines how rich we are as a

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country. It is productivity that determines how much our Government

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can afford and whether or not we need yet another dose of austerity

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to get our debt burden down to where we want it to be. With us to discuss

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the budget are Danny Alexander Chief Secretary to the Treasury and Lib

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Dem MP. And Chris Leslie his shadow. Can we talk about pensions first

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off. How many pensioners could you reckon will run out of money as a

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consequence of these changes? I suspect not very many. I think that

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one of the main reasons why we can go ahead with this change now is

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because as a coalition Government we've introduce the single tier

:10:09.:10:12.

pension, it clears away the morass of means testing that existed under

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Gordon Brown. It means from 2016 every pensioner will have basic

:10:17.:10:19.

pension from the state that keeps them out of poverty. I think people

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who save for retirement, people who have built up a pension pot are

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responsible people who the state should trust to make the right

:10:28.:10:29.

choices for themselves. But they could, they could blow the whole

:10:30.:10:35.

thing on a couple of holida? That is unlikely, but it is possible someone

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could do that. That would be to their own detriment. They would take

:10:41.:10:44.

a large pension pot in one go and pay more tax. That makes it all

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right does it? No. Presumably you did some research on this before you

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made the change? The evidence from other countries shows that people in

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general terms don't do that. Did you research it? Yes of course we did.

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But some people might choose to take their pension pot in one go use it

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perhaps some of it to pay off a mortgage. They mate decide to draw

:11:08.:11:12.

it down in different lumps. Some people might buy a partial annuity

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that might be a better choice for them. I suspect a lot of people will

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buy annuities, but it will help to make the market more competitive.

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Someone One of the concerns is that the annuity market isn't serving as

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well as it could do or as competitive as it could be. Let's

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look at the state of the economy generally, your very distinguished

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colleague, Vince Cable thinks it is the wrong sort of recovery? I'm not

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sure that is what he thinks. He thinks it is based on consumer

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spending and house price inflation, is that a healthy basis for a

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recovery? It is the way that most recoveries get going. It is the

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right start for the recovery. Actually a large component of this

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recovery isn't driven by those things. It is driven by

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manufacturing, it is driven by trade. It is not driven

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by-productivity improvement is it? No it isn't yet. Why is that? One of

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the things I have been saying for the last six months or so is 2014

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has to be the year when we see business investment really get

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going. It is one of the reasons why in this budget we have taken steps

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to increase capital allowances, support energy-intensive businesses,

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to encourage businesses to invest, because it is that which will help

:12:21.:12:23.

productivity to improve. Of course it is only with a strong recovery,

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with rising productivity that we can really secure better living

:12:29.:12:30.

standards for British people. Without that improvement in

:12:31.:12:34.

productivity we are not going to see an improvement in living standards

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are we? That is why it is so important to do the things we have

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done today. We haven't seen it so far? The figures today suggest some

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improvement, but there is a long way to go. The OBR forecasts today,

:12:46.:12:49.

building on the recent data of improving business investment.

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Suggests business investment is likely to pick up. We are not

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resting on our Laurels waiting for the forecast to happen. We are doing

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things to support exporters to grow, the big changes today to the export

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finance regime. Big changes to the tax allowances for businesses to

:13:05.:13:08.

invest in plant and machinery. Extra incentives for businesses to take on

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apprentices, to improve the skills of their own work force, all things

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that help our recovery to be more sustainable. The Office for Budget

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Responsibility says exports won't increase? We are working as hard as

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we can to make sure we do expand exports. The exports to emerging

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markets have risen 23% since we came into office. The exports to EU

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countries has been less because of the problems in the eurozone. I do

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think as the eurozone gets going, which I hope it will, I don't know

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it will, that we will see our exports to Europe expand too. I'm

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going to bring you in a second Chris, I would just like to ask,

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first of a you will, what do you make of this fantastic poster

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advertising this marvellous budget achievement, what do you make of it?

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I thought it was a spoof at first, it is pretty extraordinary. That is

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your budget they are talking about? It may be our budget it it is their

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words. I think it is rather patronising. I think it demeans some

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sensible things. There are good reasons to be supporting bingo,

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there are good reasons to be encouraging our pub sector to be

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stronger. That is the analysis behind those measures, this is, I

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don't know if it is a tweak to dry to prove -- try to prove Michael

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Gove right in one second. The Treasury have been tweeting this,

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they are also under the impression this is what they do? I'm not sure

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how to respond to that. The whole point of the budget is to say that

:14:42.:14:44.

there are many ways in which the Government can help people with the

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pressures that they are under. We're all under. I think the most

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important measure in the budget is the increase in the income tax

:14:54.:14:58.

personal allowance, that is what Liberal Democrats have been

:14:59.:15:01.

championing and celebrating. This language that is for Grant Shapps to

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justify. What do you make of it? What better of an example of an

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out-of-touch Government could you have when they start patting people

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on the head and saying what they would like. It is astonishing but we

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know, don't we, that is the sort of view that David Cameron and George

:15:18.:15:21.

Osborne have about people. You can play bingo more cheaply and have

:15:22.:15:25.

beer more cheaply, that is good isn't it? If you have 300 points of

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beer then you could get one for free on the penny-off basis, but honestly

:15:31.:15:34.

the thing that was wrong with this budget was what was missing and what

:15:35.:15:38.

was missing was any action on the cost of living pressures that people

:15:39.:15:41.

are facing. You have been talking a little bit about pensions and

:15:42.:15:45.

savings changes. Real growth in incomes coming up, that will

:15:46.:15:51.

completely... Prices are still exceeding those, the problem we have

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is we have had the record... It stops your cost of living argument?

:15:57.:16:01.

Life is getting harder for most people, for a record period, 44 out

:16:02.:16:05.

of the last 45 months when David Cameron has been Prime Minister,

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earnings haven't kept pace with prices. How many times do you think

:16:09.:16:13.

in the 120-pages of the budget red book cost of living was mentioned,

:16:14.:16:16.

not once. They don't understand it. One thing not mentioned once was

:16:17.:16:20.

productivity? There is a real problem. Not once was that

:16:21.:16:24.

mentioned? That is the inbalance we have in terms of -- imbalance in

:16:25.:16:28.

their approach to the economy. They have to have action on savings, the

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reason we have a savings crisis is because people are struggling to

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make ends meet. Once people have dipped into their savings that is no

:16:36.:16:39.

wonder the growth projections are starting to come down in the

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long-term. That has been the fuelling a little bit of the

:16:44.:16:47.

recovery we have seen. But the recovery still isn't felt by the

:16:48.:16:50.

vast ma the Jo of people. The savings ratio is coming down, the

:16:51.:16:55.

OBR has confirmed that Danny, hasn't it? The OBR does forecast the

:16:56.:17:00.

savings ratio to fall as you see in almost any economic recovery. I'm

:17:01.:17:04.

disappointed that Chris if he is concerned about the pressures that

:17:05.:17:07.

households in this country are under, hasn't welcomed the

:17:08.:17:12.

substantial increases in the income tax personal all lions, worth now --

:17:13.:17:21.

allowance, worth now ?800. You This is 25 million people paying tax at

:17:22.:17:27.

the basic rate. If you are really worried about cost of living

:17:28.:17:31.

pressures on families, your party wouldn't have crashed the economy,

:17:32.:17:34.

and causing an economic crisis. It was a banking crisis. And who was in

:17:35.:17:39.

charge of the banks. Your boss Ed Balls was the City minister. Do you

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think that Gordon Brown created Lehman Brothers to go bust. You are

:17:44.:17:48.

better than that Danny. I know as Jeremy says, sorry I shouldn't be

:17:49.:17:51.

asking the questions, you should. But you know Gordon Brown said there

:17:52.:17:55.

would be no more boom and bust, it was the Labour Party that was

:17:56.:17:57.

responsible for regulating the financial system so catastrophically

:17:58.:18:01.

poorly for many years before the crisis, it was the Labour Government

:18:02.:18:04.

that was running a structural deficit in our economy. We have

:18:05.:18:08.

heard your attack message. For many years before the crisis. Why have

:18:09.:18:16.

the deficit going to be ?75 billion at the next election, we didn't get

:18:17.:18:19.

the growth, you failed to get that. You can continue this argument in

:18:20.:18:24.

private in a minute. There is a lot to answer. In the pub over a penny

:18:25.:18:29.

cheaper pint of beer. With a game of bingo! One thing the Chancellor of

:18:30.:18:33.

the Exchequer trumpeted is what he called the biggest shake up of

:18:34.:18:37.

pensions in 100 years. He claimed I wanted to give -- he wanted to give

:18:38.:18:41.

people with pensions more access to their money. This has implications

:18:42.:18:45.

not just for those who are sensible enough to put money aside for their

:18:46.:18:57.

old age but everyone. The Chancellor may. Ing the tax on bingo, but he as

:18:58.:19:02.

also giving 13 million private pension savers the freedom to claim

:19:03.:19:09.

a bumper payout from themselves. Unlike those in the safe, called

:19:10.:19:14.

defined benefit pensions where you know what you are getting out,

:19:15.:19:18.

members of the defined contribution schemes only know what they are

:19:19.:19:22.

getting in, and what they get out depends on the luck of the markets.

:19:23.:19:28.

What private pension savers have to do when they retire is swap the fund

:19:29.:19:32.

they have built up for an income until dealt. The income they get

:19:33.:19:37.

will depend on annuity rates, those depend on how long people are living

:19:38.:19:41.

for and interest rates. If you buy an annuity now you are unlucky you

:19:42.:19:46.

will get half what you got ten years ago. If you swap the average pension

:19:47.:19:50.

fund of ?25,000, the best annuity would pay little more than ?1500 a

:19:51.:19:54.

year, that doesn't go up with inflation. From April next year,

:19:55.:19:57.

instead of taking your pension money as income you will be able to take

:19:58.:20:06.

the whole ?25,000 up front. That could make a big difference to the

:20:07.:20:13.

likes of Done, who has a tiny ?2. ,500 pension fund. The rules say I

:20:14.:20:20.

have to buy an annuity, with the rates so poor I would get perhaps

:20:21.:20:26.

under ?5 a week. It is derisory, it is a ridiculous sum. It is so

:20:27.:20:31.

frustrating, I thought I had saved it for my old age, I'm 81 now, when

:20:32.:20:37.

will I get it. I can see me dying and it is still in there. The new

:20:38.:20:41.

freedom of choice means he can get all his money next year. Even

:20:42.:20:45.

advisers who welcome the freedom of choice, say most pensioners won't

:20:46.:20:49.

want to risk spending their pension too soon. There will be a minority

:20:50.:20:53.

of people choose to use the flexibility announced today. Most

:20:54.:20:57.

people don't want to blow 40 years worth of pension savings

:20:58.:20:59.

immediately. They have saved to provide themselves with a secure,

:21:00.:21:05.

guaranteed lifetime income. On the stock market traders reacted to the

:21:06.:21:09.

budget by hammering the shares of annuity providers like Legal and

:21:10.:21:13.

General and Aviva, they are expected to lose big business. It is a

:21:14.:21:18.

cataclysmic announcement, it is a major change and nobody should

:21:19.:21:21.

underestimate that, the extent of the shock market reactions reflect

:21:22.:21:25.

that. It is too -- stock market reactions reflect. That it is too

:21:26.:21:29.

early to say where this will go. If we compare other markets in the

:21:30.:21:31.

United States, where there is no compulsion to buy annuity, then

:21:32.:21:36.

around 10% of people buy an annuity, and 90% don't. That is the polar

:21:37.:21:40.

opposite to what happens here in this country. Markets have to worry

:21:41.:21:45.

will the market drop by a half, 80%, no-one yet knows for certain. With

:21:46.:21:51.

more pension money spent sooner rather than later, the Treasury is

:21:52.:21:55.

assuming it will get more than a billion a year extra in tax. It also

:21:56.:21:59.

admits to a risk. Member of public sector pensions who want their money

:22:00.:22:02.

early could transfer their money out to the new flexible schemes, costing

:22:03.:22:06.

the Treasury hundreds of millions. So, they are banning those

:22:07.:22:09.

transfers. If you are in one of those schemes it means less freedom

:22:10.:22:17.

not more. Mark Wood is the boss of JLT Employee Benefits, a pensions

:22:18.:22:21.

consultancy. Is this a good idea? I think there is a vast array of

:22:22.:22:26.

different things included in the announcements today. We need to be

:22:27.:22:29.

specific. The big changes taking place is people are given so much

:22:30.:22:32.

more opportunity to do what they will with the money that they have

:22:33.:22:35.

accumulated during a lifetime. Is that a good idea? I think it is a

:22:36.:22:39.

good idea for some, and not such a good idea for others. One of the

:22:40.:22:42.

problems we have is people find it very difficult to appreciate just

:22:43.:22:46.

how long they are going to live for. And one of the great Joyce of

:22:47.:22:50.

annuity purchase, which is the old regime, is that the money you

:22:51.:22:54.

received was guaranteed for life. And now people will have to estimate

:22:55.:22:59.

how much they draw of their capital over time. As your film illustrated

:23:00.:23:03.

there will be some relatively elderly people who potentially run

:23:04.:23:14.

out of money. What happens then? Life expectancy is 2. 5 years every

:23:15.:23:19.

decade for a 65-year-old, that is six-and-a-half hours day, it is a

:23:20.:23:22.

dramatic increase. People need to provide for that length of

:23:23.:23:26.

retirement. We saw that annuity providers, pensions companies, their

:23:27.:23:34.

shares, many of them, took a real pasting today, was that wise? I

:23:35.:23:38.

think the market overreacted to this announcement. Large number of

:23:39.:23:41.

people, for the reasons I just described will continue to buy

:23:42.:23:44.

annuities for at least part of their pension provision. We might see

:23:45.:23:49.

going forward people will buy some of their capital for annuities for a

:23:50.:23:53.

portion of their income. Would you buy an annuity now? I wouldn't buy

:23:54.:23:58.

one today. The market clearly has reacted to quantitative easing, real

:23:59.:24:02.

interest rates have dropped dramatically. That is reflected in

:24:03.:24:06.

the price of an annuity, we need to get to a position where we have

:24:07.:24:10.

stronger real rates of return for annuities to become real value. Your

:24:11.:24:13.

advice would be don't buy annuities until interest rates go up? If you

:24:14.:24:17.

can afford to put it off. That is one of the occasion where is this

:24:18.:24:20.

change today is very good news, because it enables people to draw a

:24:21.:24:25.

bit of their capital, put off buying an annuity, wait until an annuity is

:24:26.:24:29.

better value and then invest in an annuity when the market is more

:24:30.:24:35.

favourable. Thank you very much. Now they weren't paying much attention

:24:36.:24:38.

to George Osborne's speech in the Crimea today, they had rather more

:24:39.:24:42.

pressing things on their mind, like who are they? After Vladimir Putin's

:24:43.:24:54.

incursion yesterday, including the Ukrainian's Navy head quarters. We

:24:55.:25:01.

report from there. The seizure of the Ukraine naval head quarters was

:25:02.:25:10.

a well choreographed operation. Regular troops from the naval

:25:11.:25:13.

infantry took over. One of the organisers of this morning's assault

:25:14.:25:17.

gave vent to emotions that Ukrainian rule in place since the collapse of

:25:18.:25:25.

the Soviet Union was coming to an end bloodlessly. TRANSLATION: We

:25:26.:25:29.

would like to thank all Ukrainian military men, they understand the

:25:30.:25:33.

citizens here. After 23 years of occupation, we still remain the

:25:34.:25:43.

Russian citizens. I broke down in tears when Putin said yesterday

:25:44.:25:47.

Crimea is part of the Russian federation. It started with hundreds

:25:48.:25:56.

of Russian locals storming the building, apparently unarmed. But

:25:57.:26:01.

things like this don't happen by accident here and the Ukrainian

:26:02.:26:11.

garrison's readiness to reply had been worn down. Many came out in

:26:12.:26:17.

civvies, having salvaged possessions but not dignity. TRANSLATION: There

:26:18.:26:20.

were many promises from the Russians and our side that the base would not

:26:21.:26:27.

be stormed. That all issues would be resolved from political means. It

:26:28.:26:30.

was stormed and no issues solved through political means. What has

:26:31.:26:34.

happened here today which is afterall the headquarters of the

:26:35.:26:38.

Ukrainian Navy shows how futile it is for Ukrainian service men and

:26:39.:26:42.

women to try to struggle on here, knowing as they do that there is

:26:43.:26:45.

little practical backing that their Government in Kiev can give them,

:26:46.:26:50.

and they are surrounded by a hostile population. And it wasn't just the

:26:51.:26:58.

capital that was stormed today, here another naval facility was taken and

:26:59.:27:02.

the Ukrainian national symbol soon replaced by a Russian one. As the

:27:03.:27:06.

bases fall, the Ukrainian servicemen are given an awful choice.

:27:07.:27:13.

TRANSLATION: Soldiers who will local, settled with kids and homes

:27:14.:27:17.

will statement those like me from other regions like central and

:27:18.:27:22.

western Ukraine, what have we got here, nothing. Acknowledging that

:27:23.:27:27.

some will stay, but many of their 20,000 troops will go, out Ukrainian

:27:28.:27:32.

Government was tonight discussing an evacuation plan. Elsewhere we found

:27:33.:27:41.

men of Ukrainian unit 3009 awaiting their fate forlornly. Outside,

:27:42.:27:46.

unarmed middle-aged local Russian defence volunteers maintained their

:27:47.:27:51.

vigil, confident that the Stranded garrison will change sides.

:27:52.:27:54.

TRANSLATION: Many, many soldiers and officers present at this base are

:27:55.:27:58.

changing their allegance from the Ukrainian to the Russian army. Look

:27:59.:28:02.

at us, we don't have any arms, in a few days most of the bases here will

:28:03.:28:08.

also be under Russian control. It is not Evra where and it could still be

:28:09.:28:15.

bloody. Here where there is a unit of Ukrainian paratroop who is might

:28:16.:28:19.

fight, Russia is approaching things more gingerly. How quickly to press

:28:20.:28:25.

the snuffing out of these Ukrainian forces that is the question that now

:28:26.:28:30.

preoccupies the Russian volunteers. If they miscalculate we will all

:28:31.:28:39.

know about it. Yet another day without a sign of the missing

:28:40.:28:43.

Malaysian airliner and the people on board. Tonight there have been some

:28:44.:28:52.

new development its. It is clear the Americans know far more about what

:28:53.:28:55.

happened to the plane than they are letting on publicly. It appears they

:28:56.:28:58.

are taking the lead on the search and feeding information in,

:28:59.:29:02.

particularly to the Australians. They have been examining the

:29:03.:29:05.

satellite data, the satellite pings, and I think they have established a

:29:06.:29:09.

far clearer route of where they think the plane went. Remember there

:29:10.:29:14.

was a northern arc and southern arc, it is clear they think that the

:29:15.:29:17.

plane went to the south, just off the coast of Australia. They

:29:18.:29:22.

prepared a map and the Australian authorities prepared a map. This is

:29:23.:29:25.

the search area they think the plane has gone to. Provided by the

:29:26.:29:30.

national transportation safety. That is south-west of Perth, it is miles

:29:31.:29:34.

from where it was said to be? What they think happened is after it

:29:35.:29:38.

disappeared from Malaysian radar it went south and it kept going until

:29:39.:29:44.

I'm afraid the grim scenario they are decribing is it ran out of fuel

:29:45.:29:50.

and fell into the sea. You have found something on the flight

:29:51.:29:54.

simulator that the pilot was said to have spent a lot of time on? It was

:29:55.:29:59.

a lot made about whether this was a sincer fact or some data will be on

:30:00.:30:03.

it. The Americans have been given access to the data on that, to

:30:04.:30:10.

determine whether there is data on there. We have uncovered through

:30:11.:30:14.

finding posts on lots of obscure flight simulator hobbyist websites

:30:15.:30:22.

that the captain was in fact an avid flight simulator hobbyist going back

:30:23.:30:27.

to 1985. These are some of the posts he has done. One of the last ones

:30:28.:30:30.

was talking about how cool the new system was that allowed him to

:30:31.:30:36.

simulate jettisoning fuel there. That was back in November of last

:30:37.:30:40.

year. It may be that the flight simulator does yield clues as to

:30:41.:30:43.

what happened to this flight, but there is, it seems, another

:30:44.:30:46.

explanation and more innocent explanation from having this flight

:30:47.:30:51.

simulator. He was a hobbyist. Back to the budget now. Our political

:30:52.:30:57.

leaders are too high minded to notice anything as self-interested

:30:58.:31:03.

as in a year there will be an election, but there will. The state

:31:04.:31:07.

of the economy and how people feel about the economy and their own

:31:08.:31:10.

household will be vital in how that pans out. Crucially will the

:31:11.:31:14.

coalition be able to cash in on any credit for the recovery. On the day

:31:15.:31:18.

of much travel when one of us got to go to Wimbledon. We went to the

:31:19.:31:29.

super marginal seat of Watford. A typical town, maybe not the centre

:31:30.:31:33.

of the universe, but George Osborne must pay attention here. Behind the

:31:34.:31:38.

net curtains lurks swing voters, those whose wallets could decide the

:31:39.:31:45.

next election. Here in Watford you have marginal Britain personified.

:31:46.:31:48.

It is marginal because it is a mixture of better-off and less

:31:49.:31:52.

well-off and middle Britain places. You have got Britain in microcosm.

:31:53.:31:59.

Watford school kids are growing up in a town where there are more

:32:00.:32:02.

people in work than ever. Most of them earning about ?20 more a week

:32:03.:32:09.

than a couple of years ago. But still there is a squeeze. Tim Henson

:32:10.:32:16.

is the head of PE. His wife stopped working to look after his three

:32:17.:32:20.

kids. He used to vote Labour but chose the Tories last time, he has

:32:21.:32:23.

just had to start paying the higher rate of tax although he's earning

:32:24.:32:34.

more. These are the issues, we don't go shopping, we have had to change

:32:35.:32:43.

our lifestyle, we don't go out to dinner because we have the children.

:32:44.:32:46.

People are offering to lend more money. People are saying we can have

:32:47.:32:51.

an extension on credit cards. How will you vote if you have decided?

:32:52.:32:57.

It is a trust issue, it is who do you trust the most out of the

:32:58.:33:00.

choices in front of you. Do you trust any of them? I would like to.

:33:01.:33:11.

Martin had to sign on today, his son is at school so his income support

:33:12.:33:14.

has stopped? You have applied for jobs at lots of places in the high

:33:15.:33:19.

street then. Just in the space of three weeks I have handed out 40

:33:20.:33:26.

CVs. 40? He backed the Lib Dems last time but the coalition recovery

:33:27.:33:31.

certainly hasn't reached him. I don't know what I'm going to live

:33:32.:33:34.

on, I'm with British Gas, which costs me the earth. I'm on a mooter,

:33:35.:33:40.

it was there -- a metr it was there when I moved in, it is either heat

:33:41.:33:45.

the house, keep my son warm and not eat, properly, or eat properly and

:33:46.:33:57.

not heat the houseetre, it was there when I moved in, it is either heat

:33:58.:34:00.

the house, keep my son warm and not eat, properly, or eat properly and

:34:01.:34:03.

not heat the house. I was in tears earlier thinking about everything.

:34:04.:34:05.

It is hard. The Government says the economy is recovering, do you think

:34:06.:34:10.

the economy is recovery? I think for some people it is recovering, for

:34:11.:34:15.

others it is not. I think the country is split in two. In Watford,

:34:16.:34:24.

like all over the country, Osbourne's recovery has come with

:34:25.:34:28.

hundreds of new firms, Andrew and Clare's dog care company is

:34:29.:34:35.

thriving, not a luxury they insist. They say they are traditional

:34:36.:34:38.

Tories, but now they are not so sure. We are fiddling around at the

:34:39.:34:43.

edges of the economy and stuff isn't enough. I think someone needs to

:34:44.:34:47.

take a real hold of things and really take drastic approach. When

:34:48.:34:52.

you are down right in it, running a business and you do want the

:34:53.:34:56.

Government to get behind the small businesses that are creating jobs

:34:57.:34:59.

for people out there, you want them to see that and actually maybe speak

:35:00.:35:03.

to us and speak to others like us who are in smaller businesses to see

:35:04.:35:08.

what we actually need. It certainly wasn't a budget that will get

:35:09.:35:13.

average voters in average towns's pulses racing, there probably wasn't

:35:14.:35:16.

much that will change how most people feel about their own

:35:17.:35:20.

situation. But Westminster's assumption is that what is said on

:35:21.:35:23.

the economy will decide the election. In a marginal seat like

:35:24.:35:28.

Watford the economic argument is vital. The argument is a contest

:35:29.:35:33.

between two narratives, the Tory narrative, don't give the keys back

:35:34.:35:38.

to the people who crashed the car, Obama's favourite slogan from a

:35:39.:35:41.

couple of years ago. Versus Labour saying are you better or worse off

:35:42.:35:46.

than you were in 2010 when the coalition came into being. Labour is

:35:47.:35:50.

fractionally ahead on standards of living, but on all the other

:35:51.:35:53.

economic independent Kators the Tories are ahead. And perhaps

:35:54.:35:58.

crucially people do think that cutting the deficit must be the

:35:59.:36:13.

prime objective of the Government. Here and everyone the economy

:36:14.:36:17.

matters. Dwarfing everything said today the economy is still the

:36:18.:36:30.

biggest show in town. Government. Here and everyone the economy

:36:31.:36:32.

matters. Dwarfing everything said today the economy is still the

:36:33.:36:34.

biggest show in town. Now the judgment of the Newsnight panel,

:36:35.:36:37.

they have been still at it. Lord Fink, Lord Finkelstein, ollie,

:36:38.:36:49.

thinking it both democratic and undemocratic and John McTernen, who

:36:50.:36:56.

has paid his debt to society after serving in John Major's Government.

:36:57.:37:00.

Do you think it was a very political budget, it was wasn't it? Actually I

:37:01.:37:06.

thought that the politics of it were dwarfed by the policy. I don't think

:37:07.:37:09.

the political shift that is budgets make are really huge, but the policy

:37:10.:37:13.

revolution on pensions is very significant. Its implications will

:37:14.:37:19.

last for years. Obviously it depends who is right. I personally I'm in

:37:20.:37:25.

favour of the rather radical package on the liberalising of pensions. You

:37:26.:37:30.

are less in favour of it. I think it is right thing to do. What are you

:37:31.:37:36.

sniggered for, please -- sniggered for, please explain? Budgets have

:37:37.:37:42.

ideas that look good on the day and fall apart in the coming days.

:37:43.:37:46.

Nobody understood it in the House when it was set out. Steve Webb

:37:47.:37:59.

probably did. The implications are bigg days. Nobody understood it in

:38:00.:38:02.

the House when it was set out. Steve Webb probably did. The implications

:38:03.:38:04.

are big. We encouraged people to save for pensions and gave them tax

:38:05.:38:07.

relief. The moral hazard is great, in the 80s and 90s a lot of people

:38:08.:38:12.

will end up on benefits because you can't trust people to spend their

:38:13.:38:16.

own money sensibly, planning for their retirement. They don't imagine

:38:17.:38:21.

at 65 they will live for 30 years and you are encouraging them now to

:38:22.:38:27.

spend all their money. Steve Webb whose finger prints are all over

:38:28.:38:30.

this would talk about the fingertip pension which is generous in the

:38:31.:38:34.

extreme. There is a complete revolutionary change coming in that

:38:35.:38:37.

respect as well as in pensions, I agree with John, as everyone was

:38:38.:38:41.

sitting in the chamber, instantly overnight everyone is becoming a

:38:42.:38:45.

pensions expert. We don't force people to save in the first place at

:38:46.:38:49.

that rate, it seems wrong to force them to have to spend the investment

:38:50.:38:53.

on an annuity in that way. They could run out of money by not saving

:38:54.:38:58.

it. The point of this policy is it will encourage them to save. If they

:38:59.:39:02.

spend additional money they have to pay tax for them in the end. That is

:39:03.:39:06.

a disincentive. In a policy sense this is the difference between

:39:07.:39:09.

people who think people should be trusted with their income and those

:39:10.:39:12.

people who think it is a gamble. It is a gamble. We know that

:39:13.:39:16.

20-year-olds don't save enough, we are trying to force them through

:39:17.:39:20.

automatic enrolment to do. That there is a contradiction. The

:39:21.:39:24.

question about is it a political budget, it is a deeply political

:39:25.:39:29.

budget. I disagree with Danny. It is the pensions and the substantive

:39:30.:39:34.

change and I would say with the tax threshold on the front of the Lib

:39:35.:39:38.

Dem manifesto, it is delivered and plus, plus. It is now ?800

:39:39.:39:43.

deduction, that is incredibly political. Single individual

:39:44.:39:50.

puttings don't have very profound political effects. It sends a

:39:51.:39:54.

message. We always ignore when budgets happen is what is underneath

:39:55.:39:57.

the budget. In other words the budget consists of some changes that

:39:58.:40:00.

have been made on the existing situation on tax and spending. But

:40:01.:40:03.

actually what will settle the election is the existing position on

:40:04.:40:07.

tax and spending and growth. So the Conservatives, for example, are

:40:08.:40:11.

going to have a big fight on their hands and the Liberal Democrats too

:40:12.:40:14.

on the issue of public spending, because this budget means there is

:40:15.:40:17.

going to be big public spending cuts.

:40:18.:40:20.

Let's take what is said about growth. Does this, Danny Alexander

:40:21.:40:27.

sounded quite cocky about the fact that it is not as Vince Cable says a

:40:28.:40:33.

false recovery? There is going to be a people's personal income --

:40:34.:40:37.

people's personal incomes are going to recover, that is clearly going to

:40:38.:40:40.

be something that will help the coalition parties at a general

:40:41.:40:42.

election. It is not the only issue, it is not decisive but clearly it

:40:43.:40:48.

will help. The OBR projection was adjusted for greater growth an a

:40:49.:40:52.

year ago, that is significant. What is it based on? The big political

:40:53.:40:55.

challenge for Labour. It is not based on any productivity

:40:56.:41:01.

improvement at all? It is based on increasing employment and salaries

:41:02.:41:05.

will increase as well and mostly on the Helps to Buy. This is a problem.

:41:06.:41:09.

There in lies an issue. It is house prices. There in lies the absolute

:41:10.:41:14.

contradiction at the heart of this you say you rebalance the economy,

:41:15.:41:17.

and there you have a Government-driven, house price-led

:41:18.:41:20.

economic boom, and the problem with that is that booms are followed by

:41:21.:41:25.

busts, we had a situation like this. There was somebody who predicted

:41:26.:41:29.

there will be no more boom and bust I'm trying to remember who it is.

:41:30.:41:32.

The challenge for the Labour Party is there is also a very political

:41:33.:41:36.

moment from George Osborne which is about this benefit cap issue. I

:41:37.:41:40.

think that is a real challenge for Labour and I was really surprised

:41:41.:41:46.

that even in the chamber that Ed Miliband didn't in any way find a

:41:47.:41:49.

way to respond to it. Clearly this question of where people are with

:41:50.:41:53.

their incomes will be of importance. Basically John Labour and you have

:41:54.:41:57.

been against the fact that there wasn't an increase in growth and now

:41:58.:42:01.

you are against the growth. Let's go back to the benefits cap, it is a

:42:02.:42:05.

good question and point to make, I'm pretty sure that Labour will support

:42:06.:42:11.

the benefits cap, however, you have a benefits cap of ?26,000 if you are

:42:12.:42:18.

poor, but a childcare cap of ?300,000, what is the logic there,

:42:19.:42:21.

go back to the policy, it is to buy the votes of professional voters.

:42:22.:42:25.

What age group do you think the budget was most directed at? Over

:42:26.:42:33.

45, probably 55. Old people? People in that age gap are four-times more

:42:34.:42:39.

likely to vote than younger people. He may be right? Let's question

:42:40.:42:43.

that, what older people are going to do is be able to withdraw from the

:42:44.:42:47.

savings policy, but this actually allows people to save during their

:42:48.:42:51.

working life. It is not just a policy that works for older people.

:42:52.:42:54.

Clearly by the way it does. And I think you know looking at the

:42:55.:42:58.

political implications, obviously one of the implications will be to

:42:59.:43:02.

try to assist the Conservative Party against UKIP. That is no question

:43:03.:43:06.

that a political calculation that is. Their voters are by and large

:43:07.:43:11.

male and older people who are economically less well off. Clearly

:43:12.:43:16.

it is designed to help them some what. This fails to recognise that

:43:17.:43:20.

kind of especially for Lib Dems in movement what has been a substantive

:43:21.:43:24.

change and really fascinating is the tax threshold, but staying with

:43:25.:43:27.

pensions, you have had the same minister who is known to be an

:43:28.:43:33.

expert in that sector, in this job, in DWP, Steve Webb, the question,

:43:34.:43:39.

the exam question he will not have asked himself is what will win the

:43:40.:43:43.

number of votes? What can we do in this sector that is going to make a

:43:44.:43:51.

difference? My My problem with the -- pensions is that they have to be

:43:52.:44:01.

changes. Why wasn't it consulted on? Probably because there are losers.

:44:02.:44:05.

The rollout isn't until 2026. There is time for people to adjust. You

:44:06.:44:08.

should have consulted before the announcement was made, pensions are

:44:09.:44:13.

really delicate areas. This is a liberalisation. Can we get away from

:44:14.:44:18.

this Steve Webb fan club! You wrote an article in the Times this morning

:44:19.:44:24.

in which you argued that the budget, the whole Budget Day thing was

:44:25.:44:29.

profoundly misconceived? Yes. I think that. That is one of the

:44:30.:44:32.

reasons I said at the beginning that I thought the political implications

:44:33.:44:35.

of it were always overestimated. I believe that Governments should try

:44:36.:44:38.

to set frameworks within which people can operate and they can be

:44:39.:44:42.

different kinds of framework, I'm not judging which they could be. Let

:44:43.:44:47.

as say you believe that a low-tax, low-regulation economy was a good

:44:48.:44:51.

thing. If you have freak budgets you basically start to meddle, you move

:44:52.:44:55.

up and down as the forecasts move up and down. You adjust taxation in

:44:56.:45:01.

order to create posters or short-term effects. I think our

:45:02.:45:05.

political life is strewn with events, springs conferences, annual

:45:06.:45:09.

conferences, budgets, Autumn Statements, each of which put a

:45:10.:45:13.

pressure on the office of the minister, the Chancellor, to make

:45:14.:45:19.

silly announcements. We get more and worse policy announced at these

:45:20.:45:25.

events than if we had the perameters -- parram at thes set. It is like

:45:26.:45:30.

the lowest common denomination version of this is the road trip.

:45:31.:45:48.

Let's take the beer tax. The beer tax has been designed to produce

:45:49.:45:51.

headlines on the day. You have to have enough so Newsnight doesn't

:45:52.:45:56.

have to start with this stuff because it is boring. That is what

:45:57.:45:59.

you are after. I don't think that is driving good policy making. That is

:46:00.:46:02.

enough excitement for tonight, thank you all very much from us good

:46:03.:46:28.

night. Good evening. Not a particularly pleasant start to the

:46:29.:46:31.

day across Scotland and Northern Ireland, it will be wet and windy, a

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gust of wind, 50, 60 miles an HOUFRMENT all

:46:36.:46:36.