19/03/2014 Newsnight


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


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


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


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


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


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


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


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


convened the very muchable Trinity of the Newsnight -- venerable


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


savers. Pensioners will have complete


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


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


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


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


of the putative UKIP voter. Not surprising that with elections


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


Tory fold. Here you will find no factory line,


no noise, no men. Leave your preconceptions about manufacturing


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


surfaced this evening. Commending the hard working beer drinkers of


the bingo halls, labelled patronising and a bit Marie


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


broadly positive. Look at unemployment, the rate at which


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


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


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


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


be worried about some of these projections. Economists have spotted


some slightly troubling symptoms. For example some statisticians think


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


country. It is productivity that determines how much our Government


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


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


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


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


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


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


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


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


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


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


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


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


responsible people who the state should trust to make the right


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


to increase capital allowances, support energy-intensive businesses,


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


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


with rising productivity that we can really secure better living


standards for British people. Without that improvement in


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


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


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


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


building on the recent data of improving business investment.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


personal allowance, that is what Liberal Democrats have been


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


wonder the growth projections are starting to come down in the


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


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


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


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


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


disappointed that Chris if he is concerned about the pressures that


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


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


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


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


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


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


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


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


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


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


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


responsible for regulating the financial system so catastrophically


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


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


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


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


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


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


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


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


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


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


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


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


also giving 13 million private pension savers the freedom to claim


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


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


members of the defined contribution schemes only know what they are


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


of people choose to use the flexibility announced today. Most


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


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


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


budget by hammering the shares of annuity providers like Legal and


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


cataclysmic announcement, it is a major change and nobody should


underestimate that, the extent of the shock market reactions reflect


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


there will be some relatively elderly people who potentially run


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


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


dramatic increase. People need to provide for that length of


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


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


think the market overreacted to this announcement. Large number of


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


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


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


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


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


interest rates have dropped dramatically. That is reflected in


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


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


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


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


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


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


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


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


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


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


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


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


a well choreographed operation. Regular troops from the naval


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


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


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


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


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


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


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


of Russian locals storming the building, apparently unarmed. But


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


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


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


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


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


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


happened here today which is afterall the headquarters of the


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


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


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


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


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


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


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


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


will statement those like me from other regions like central and


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


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


Government was tonight discussing an evacuation plan. Elsewhere we found


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


unarmed middle-aged local Russian defence volunteers maintained their


vigil, confident that the Stranded garrison will change sides.


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


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


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


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


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


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


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


preoccupies the Russian volunteers. If they miscalculate we will all


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


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


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


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


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


particularly to the Australians. They have been examining the


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


finding posts on lots of obscure flight simulator hobbyist websites


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


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


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


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


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


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


explanation and more innocent explanation from having this flight


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


Government to get behind the small businesses that are creating jobs


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


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


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


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


much that will change how most people feel about their own


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


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


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


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


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


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


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


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


economic independent Kators the Tories are ahead. And perhaps


crucially people do think that cutting the deficit must be the


prime objective of the Government. Here and everyone the economy


matters. Dwarfing everything said today the economy is still the


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


matters. Dwarfing everything said today the economy is still the


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


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


thinking it both democratic and undemocratic and John McTernen, who


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


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


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


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


revolution on pensions is very significant. Its implications will


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


extreme. There is a complete revolutionary change coming in that


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


sitting in the chamber, instantly overnight everyone is becoming a


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


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


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


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


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


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


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


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


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


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


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


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


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


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


deduction, that is incredibly political. Single individual


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


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


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


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


actually what will settle the election is the existing position on


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


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


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


going to be big public spending cuts.


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


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


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


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


be something that will help the coalition parties at a general


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


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


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


challenge for Labour. It is not based on any productivity


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


political implications, obviously one of the implications will be to


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


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


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


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


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


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


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


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


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


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


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


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


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


should have consulted before the announcement was made, pensions are


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


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


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


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


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


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


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


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


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


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


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


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


political life is strewn with events, springs conferences, annual


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


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


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


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


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


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


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


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


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


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


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


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


gust of wind, 50, 60 miles an HOUFRMENT all


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