16/03/2014 The Andrew Marr Show

Good morning. And, of course, it's Budget week ahead of us. The minimum

wage to be doubled? The top rate of tax to rise to 85p in the pound and

banks to be nationalised? Plus, a clear announcement that the United

Kingdom is to leave the European Union. More or less what the Budget

would have said if Tony Benn had been in power. I was going to say

rest in peace. But it's hard to think of anybody less likely to do

that. If the angelic horde isn't a closed shop already, they'd better

get cracking. There's much reflection on the life and career of

Tony Benn in today's papers, and of course plenty of speculation too

about the Budget coming up this week. Our reviewers this morning are

the former Labour MP Clare Short, Stephanie Flanders, no stranger to

the studio as the BBC's former Economics Editor, now with the

investment bank JP Morgan. Budgets are always as much about politics as

economics, especially with an election in sight, so how will the

Chancellor resolve the conflicting pressures on him - notably over

income tax, which has dominated the build-up this time? Will he side

with the Lib Dems, who want more help for the low-paid? Or with those

in his own party, demanding relief for "middling professionals"? George

Osborne is here. Facing a mountain of debt, can he persuade us to

swallow even more austerity? That's a problem for Labour too. The Shadow

Chancellor, Ed Balls, is also here to explain how he'd make the cuts,

or raise the taxes, to balance the nation's books. He and Mr Osborne

are not exactly known for their warm and friendly relationship. But they

did recently form a united front against Scottish independence. They

warn that if Scotland goes its own way, it won't be allowed to keep the

pound. Scotland's First Minister Alex Salmond says they're bullying,

and it'll backfire. With six months to go till the referendum, is the

currency now the crunch issue in deciding Scotland's future? I'll be

asking Mr Salmond later. Serious questions for serious times, but we

finish with some music guaranteed to lift your mood:

The Excitements, over from Barcelona, with the sound of Motown,

they'll be bringing us some Spanish soul at the end of the show. But

let's start with the news, from Naga Munchetty. Good morning. People in

the Ukrainian region of Crimea have started voting in a controversial

referendum. Two million voters are being offered a choice between

joining Russia or gaining greater autonomy within Ukraine. The ballot

has been organised by the new pro-Russian administration in the

region but it's seen as illegal by the government in Kiev and its

western allies. Our correspondent Ben Brown sent us this report from

Crimea. It is a referendum condemned around

the world as a sham, but for many Russians here it is a moment of

history they have longed -- long dreamt of, chance to be ruled not by

Keir but Moscow. To many observers the result seems a foregone

conclusion, a large majority in favour of reuniting with Russia for

the first time in 60 years -- Kiev but Moscow. The optimistic spirit is

high among people. Everybody wants to entrust us to Russia so we will

feel that lifting spirits. It is spring, and we want to live. When I

look at the protest is, it is pure horror. At the United Nations

Security Council, Russia inevitably vetoed the resolution condemning the

referendum is illegal. But Moscow was isolated. China, so often it is

allied, chose to abstain. -- so often its ally. It did not stop

Russians here in Simferopol from celebrating even before a ballot had

been cast. They are utterly confident they will win today's

referendum. But, actually, this peninsula is already de facto

Russian. Thousands of Russian troops in self defence volunteers on the

ground have made sure of that. Crimea already belongs to Moscow.

America calls it annexation by the back door. And it seems certain that

the referendum will trigger immediate Western sanctions against

Russia. Investigators are focusing their

efforts on the possible role of the pilots in the mysterious

disappearance eight days ago of a plane with 239 people on board.

Evidence suggests that the Malaysia Airlines flight was diverted from

its route between Kuala Lumpur and Beijing by a deliberate action from

someone on board. The homes of both the pilot and co-pilot have been

searched by police. The Chancellor George Osborne and

Labour's Ed Balls have set out their competing messages, ahead of this

week's budget, with articles in Sunday newspapers. Mr Osborne has

pledged to build a resilient economy and says that a recovery is underway

but the job is not yet done. However, the Shadow Chancellor has

challenged his claim, saying millions of working people on lower

incomes are not feeling any recovery at

Police are looking for a mother who took her one-year-old daughter from

a foster family during a supervised visit. Lola Page was taken at about

1:00pm on Friday afternoon by Stacey Ball, who is thought to have got

into a dark coloured car with the child. West Midlands Police say

they're extremely worried about the welfare of both and anyone with

information is asked to contact them. A North Yorkshire town has

been named as the best place to live in Britain. Skipton tops the Sunday

Times list, with Newnham in Cambridge second. Monmouth and

Falmouth are third and fourth. Low crime rates, good schools and

reasonably priced property were credited with helping the areas top

the list. That's all from me, for now. I'll be back with the headlines

just before 11:00am. Back to you, Andrew. Thank you Naga. Now to the

papers. There are two huge stories, the one for the hunt for the

hijacked flight on the other with what is going on in the Crimea.

Sunday Times says Putin goes to the brink of war the Sunday Telegraph

goes with the fear of that 9/11 style plot. The Observer leads with

the high-speed rail link -- rethink with work beginning in the North to

push jobs. All many theories there. And with me to review the papers are

Stephanie Flanders and Clare Short. Can we start with the Ukraine,

probably the biggest political story of the world, probably? I want to

draw attention to the wise commentary in the Independent. This

sort of Putin is wrong, the West is right is a really false story and

thus encircling Russia saying that Ukraine will come to the EU and then

come into NATO is bound to inflame Russia. And of course, Crimea has

been part of Russia through time -- for a long time, and we are behaving

in a provocative way and we should back off and why not have more

autonomy for Crimea. Calm it down. I don't think there will be a war

because we won't go to war. The big question is, is this the beginning

of something bigger? Crimea, then eastern Ukraine, Moldova, the Baltic

states, or is this a one-off event? I don't think any of the papers tell

us the answer. There is a massive spread. The Sunday Times says that

our honour is at stake and we will dive the Ukraine. It is shaping up

to be an important moment -- we will dive for the Ukraine. But we also

have completely underestimated from day one, because we went on the

assumption he wouldn't put the narrow interest ahead of the broader

economic interests because Russia would be the biggest loser from

sanctions. The City of London would be a big loser. We have been

enjoying large amounts of slightly dirty Russian money will sloshing

around. It looks like it wouldn't have a huge economic impact because

Russia is a small economy and the financial book is not that large but

we could be surprised how much we find we are connected with Russia.

Gas is important to Western Europe, so that's another part of the game.

Equally, Putin has supposed that the West would not back up their actions

and he has not been proved wrong so far. But it is not a clear-cut

situation. There is even a suggestion that the European Union

countries might not all agree with song sucked -- strong sanctions

because of the rebound on them. We are being foolish surrounding him.

Not that he is a nice man, but look at the US behaviour over Cuba, they

didn't want anything pro-Soviet near to them and have behaved in a strong

way. We will talk a lot about the Budget, and maybe you can keep this

up with stuff about the budget. -- kick us off with stuff about the

Budget. I think the big thing is the massive rise of inequality. After

the US we are one of the biggest countries that is unequal, and then

you have the Queen saying nobody helps the poor, and then you have

Danny Alexander saying it is the low-paid who need help. There is all

the talk about cutting taxes the people on ?40,000. -- on people on

?40,000. It is terrible to people on low incomes, they won't be able to

consume that will keep the flat. It's an interesting moment. Normally

we would say this is a fantastic budget for George Osborne who is

away from an election and everything is coming up roses. What is striking

is how the rising economic confidence has not transferred to

great support for the coalition. And is it because people are simply not

feeling it in their pocket? The impact on living standards in the

last few years and the fact that they are not picking up in the way

the economy is picking up is part of that. That is the challenge for

everyone. There is a piece in the Sunday Telegraph about Osborne being

about to disappoint the middle class because he won't be able to show the

economy is strong enough to do anything for the middle. This is

what is fundamental to the living standards debate, the debate about

taxes, what is going on in the economy? In my old job I used to

talk about the productivity puzzle, the view you take on how much room

there is for the economy to grow affects how much the Chancellor has

to tighten over the next few years, how much public spending has to fall

and how much he has to give in taxes. The office the budget

responsibility is taking a gloomy view on the amount of room for

growth -- the office for budget responsibility. In Birmingham are

they talking about HS2 as an engine for recovery? The City Council says

it is all wonderful, but those of us who use the train say we have a

brilliant service, three trains an hour, an hour and 20 minutes, is

this the highest priority for the country must let's invest in

infrastructure but we have a very good train service. Maybe it's more

important further north. There was the story about Vince Cable talking

about speeding up the second stage. They are losing the argument really.

They started with economic arguments that rather faded away and then it

came about narrowing the north and South divide. Just building a faster

link between Birmingham and London, how would that help Birmingham more

than London? We should be looking at the rail links that are bad in the

North. There is the need for a northern hub. In the speed of

getting to London, and Birmingham is good, but by the time you get to you

walk or Leeds, it doubles the time. Even the second bit will not go

beyond the Pennines -- you get to you walk or leads. There are echoes

of coverage about the Malaysia and plain. Have we learnt anything new

-- acres of coverage about the Malaysian plane. There was screaming

about the two young men, and then it was asylum seekers and it wasn't

then. The current one is that the pilot was a fanatical supporter of

the opposition leader, who was chair of the development committee at the

World Bank when I was in -- in the UK Governor. The thought that

somebody with reasonable views would commit suicide and kill these people

without saying anything is unbelievable. The more it goes on,

the less we know. A genuine mystery. There is this sense that most

stories in the papers are variations on stories we have heard before.

This is generally a story we have not heard before so we are

mesmerised. Absolutely. Lots of interesting thoughts about the

number of airfields within the range of the plane. So excruciating for

the families. We all hope that they landed in Kazakhstan and they were

all come trooping out, but it's very odd. The way the world economy has

changed we have huge numbers of relatives who were Chinese, and who

would not have had that ten years ago. The technological aspect is

fascinating. You found out that the engine had still been talking to

Rolls-Royce of all of these hours, and these technical things carry on

after the radars do not track them. In effect you have computers talking

to each other. We must turn to the other story of the week in

politics, the death of Tony Benn. You have chosen something from the

Sunday Times, a chap called Adam Bowden. Everyone knows that Tony was

utterly charming, whatever his political positions. Lovely family

relationships, are very happy marriage. When his son had his first

day at the front bench, Tony Benn and tears rolling down his eyes.

This strange political trajectory because he could have been a very

influential politician if he had stayed in the mainstream but he went

off and became a hate figure, then became a national treasure. The

obituaries until now have been charming, now they are turning

nasty. This on saying he was ineffectual and usually wrong. What

is your view of him during the years of the Bennite upsurge? Did it do

the Labour Party damage? I think the divisiveness was something we didn't

understand at the time, and that was his power base and I think he got a

little bit high on that adoration. I think he should have been in power

longer and the people we were supposed to represent suffered as a

consequence, but he was a brilliant communicator. Stephanie, he was a

family friend? Yes, throughout my life I have celebrated the American

Thanksgiving every year with Benns. The interesting thing is how many

people felt a personal connection with him. I'd think across the

nation over the last few days people will have been hearing that voice on

the radio and perhaps feeling sadder than they expected. Andrew Walmsley

has been touching on some of the things you were mentioning, he also

felt a personal connection because he had interviewed him, and he

mentions when David Cameron and Boris Johnson wax warmly it is about

respect but also a seal on his failure. He didn't like to be

interviewed, he had a special machine that wipes the tape from the

tape recorder. One of the big issues in the economy is house prices, and

I think you have something on that, Clare. It says it so graphically,

one London home, all 25 in the north. Some of these beautiful parts

of Britain, I think, over this time this will rebel into the economy.

When you hear that Skipton is the best place in the country, go to

Yorkshire. Lots of parks, good space, good schools. Everyone in

London will be thinking, should I sell my house and buy a castle? It

is extraordinary. Stephanie, you have eloquently left a picture on

the table of a bald man with an apple on his head. Luck I have been

living with my partner Jonathan I've... You have been living with

your partner who writes about Jonathan Ive! He should have been

one of the great British heroes but we never hear about him. I have to

say this but it is a very interesting read and it is not

someone you hear from very often. Thank you both very much indeed for

that. Over to the weather forecast now. We have had truly springlike

weather in the last week, are we in danger of being carried away? It has

been very springlike over the last week and temperatures will be doing

very well for the time of year. We could see 19 Celsius today. It is

bright and breezy for the rest of the day with high pressure generally

still in charge of things, but blustery winds perhaps of up to 50

mph in Scotland, but they will ease through the course of the afternoon.

Further south will keep the sunshine for the longest, up to 19 Celsius

here. The cloud infiltrates the country this evening and overnight.

Some hillfort and drizzle for western coasts and up slopes but it

will be frost free to start Monday morning. For Monday itself, we will

have quite a bit of cloud on offer, some drizzly rain possible for

western areas, but in general it will be a largely dry day on Monday.

Temperatures up to 15 degrees, and for the rest of the week we will see

blustery conditions at times with rain in the north and cloudy skies

as well. Ed Balls said recently he was daunted at the prospect of

becoming Chancellor if Labour win the election because of the huge

levels of borrowing and debt he would inherit. Whoever you blame for

that, it is true that balancing the Budget will be a huge task so how

will he go about it? Ed Balls is with me. Good morning. You have

given me a list of things you would like to spend, including a huge

house-building projects, but also things like bringing the 10p rate to

help people at the bottom, and much more childcare for families and so

on, and the big question is how you will pay for it? We set out how we

would pay for each of those items, we said we would raise the bank levy

to give more childcare to working parents. We would pay for the 10p

rate by abolishing the unfair marriage tax break which George

Osborne has only given to a third... Very popular, of course. It

goes to only a third of married couples, only one in six families

with children get it, you only get it if you have only one earner in

the family. If both parents are going to work, you get no help from

David Cameron. A 10p rate would help all lower and middle income

families. We would do a mansion tax over ?2 million as well. These

things are paid for. I'm not making any spending commitments that we

haven't showed how we would pay for it. What about the jobs guarantee?

It is an important policy because we would end up spending huge amounts

if we allow long-term unemployment to become entrenched for young

people. We want to give young people are guaranteed job on the minimum

wage which they would have to take on lose benefit, plus restricting

pension tax relief for the highest earners over ?150,000 to the same

rate as everyone else. It is all paid for. We will be responsible on

public spending. The bankers' bonus you have already said you would use

for the VAT rise and indeed to pay for returning to the old level of

child benefit so that is at least two ways you have spent that money

already. We are still in opposition, we haven't spent it at all. The next

Labour government will have a bank bonus tax in the first year which

will only be used to pay for the jobs guarantee. So you won't be

reversing the VAT rise and you won't be able to replace the child

benefit? I have said some tough things to the Labour Party, that we

will get the debt falling, stick to the spending plans of the Government

in 2015/16. I cannot promise to reverse the VAT rise even though it

was a foolish mistake of George Osborne. What about the cuts in

child benefit, is that going to stay? Ed Miliband said last year

that when it comes to deciding our priorities for the Government, there

is a cost of living crisis which is hitting middle and low income

families. Will it be to restore it to higher earning families, I would

like to but we cannot commit to that. It cannot be a priority

because at the moment we have a broad cost of living crisis. We can

freeze energy prices for everybody. Why doesn't George Osborne act in

this Budget? He boasts about recovery, but most people are not

feeling it. Why is the 10p rate better than raising thresholds? It

cuts the margin rate for people coming into the threshold. It is a

good thing to do, it is why we introduced it in the first place. It

is a good way to support work and help middle and low income families.

So why did you scrap it in government last time round? It was a

mistake, many people told Gordon Brown it was the wrong decision.

When you have made a mistake, you should admit it and learn from that.

Gordon Brown has made a mistake, he should admit it perhaps. To be

clear, what you haven't apologised for is the level of public spending,

you will not apologise for that because you think it is fair enough

despite the level of debt afterwords. It is a global financial

crisis that happened all around the world and the deficit rose. George

Osborne at the time had matched Labour's level of public spending.

Am I going to apologise that George Osborne and Alistair Darling agreed

on in 2007? Absolutely not. We should be honest about our mistakes

because that is the way to show... Alistair Darling and Tony Blair have

said in retrospect but knowing what they know now, the spending was too

high. You wouldn't go that far? We had a very low deficit, low national

debt before the crisis, and what happened was a collapse in tax

revenues because of the crisis. Nothing could have been done

precrisis to raise taxes or cut spending. The issue was the falling

tax revenues because of the crisis. The reason for asking you about this

is because we have to trust you about making huge cuts after the

election if you win, and yet every time I talk to you about where you

are going to make the cuts, you respond with a spending commitment.

Today I have said to you that every commitment I am setting out is paid

for and costed. Give me an example of where you are going to court to

balance the books. We will match the Government's spending plans in 2015

and 2016. To get the deficit down in a fair way, we will reintroduce the

50p tax on those earning over ?150,000. We will take away the

winter allowance for the richest pensioners. I think that is the

right thing to do and George Osborne may agree but he is not allowed to

say so. On HS2, we are going to hear tomorrow from the new chairman. If

the Budget rises over 50 billion, will the next Labour government

cancelled project? Back in our conference I said I was very worried

about mismanagement and rising costs. David Cameron and George

Osborne panicked and brought in David Higgins to do a review which

comes out on Monday. I hope he will show he has got the down. If he does

so, we will support this at the second reading but at every stage of

this project over the next few years, I am going to say there is no

blank cheque. The costs have got to come down. If this is not a value

for money project... So, you are sceptical? We have not seen the

report yet. We will support this because investment in new capacity

is needed, north and south. We will support it at second reading but we

will continue to be vigilant and get the costs down. We work -- we will

talk later, but for now thanks very much indeed. There is six months ago

until the referendum on Scotland's future. Would an independent

Scotland be able to keep the pound? There are many other important

questions as well. Will the Scots need passports when they travel down

south? There is a huge amount at stake in this vote and I am joined

now from Aberdeen by the First Minister, Alex Salmond. You haven't

done too badly in the polls, but of your own supporters as well as those

going to vote in the referendum no, everyone wants to know what your

plan B will be if you cannot keep the pound. Are you going to

enlighten us this morning? Not doing too badly was a euphemism. The polls

have moved to 42% as the average in February, and the yes campaign seems

to have the momentum. One of the reasons is that people can see

through scaremongering when they hear it. An example of that is the

bluster from people like Ed Balls and George Osborne on sterling

because it is clear that not sharing your currency would cost the rest of

the UK more than it would cost Scotland. In transaction costs about

?500 million but also if you claim ownership of all of the assets, then

you end up with all of the liabilities and that comes to

100,000 million pounds which would otherwise be Scotland's share of the

national debt. A decision is also to independence, -- it could be that

they are so hostile to independence that they wanted lunch your guns.

Maybe there is no goodwill on both sides. -- blunt your guns. That is a

good point. If you look at the working group of Nobel prize winning

economical laureates assembled by the Scottish Government, on their

recommendation, they also set out a range of options for an independent

Scotland. There wasn't just a plan B. We should argue for what is best

for Scotland and the rest of the UK. What is an interesting aspect, this

week we've seen a huge number of people, even the president of the

US, and John Kerry, the Prime Minister claiming moral

superiority, rightly in terms of the Scottish referendum as an agreed

consensual process, as opposed to the snap referendum in the Crimea

arranged by the Russian government and Crimea. Of course, you lose all

of that moral superiority in the democratic process if you then say

that Scots have the right under this process to vote for independence,

but we will set about chucking them out of the EU, the whole argument

dissolves. We have a democratic process in Scotland, consensually

agreed, and it requires people on this side of the border and in

London to express common-sense goodwill that the people want to

see. I will come back to the EU later, but back to the currency,

nobody can know what will happen after a referendum and a yes vote,

therefore Scots will be left in a situation where they don't know what

currency they will be using afterwards. Is it not sensible to

have a plan, and if Scotland will be so successful and rich, what would

be so bad about a Scottish currency? What is the argument

against it? I thought I addressed that in the last question. What I

pointed out was the fiscal commission working group set out not

just a plan B, but many plans, a range of viable currency options for

an independent Scotland. Clearly we should argue for the first option,

the thing that is in the best interest of Scotland and the rest of

the UK. I am also suggesting that the attitude of Ed Balls and George

Osborne, shoulder to shoulder, hand-in-hand, not only undermines

the Labour Party in Scotland incidentally, but is also the wrong

attitude for politicians in London to have. That is the bullying

attitude which increases support for the yes campaign at the moment. We

should respect the right of the Scottish people to express their

view on independence and follow the Edinburgh agreement that said after

the result that politicians in London and Edinburgh should act in

the best interests of Scotland and the rest of the UK. That is what we

are doing and I don't think it is much to ask London politicians to do

the same. So why not a Scottish currency? Again, the fiscal

commission working group set out a range of monetary options. I am

asking you and your own words to tell us. The range of options is

there within the working group's proposals, which were published. The

best option they identified was sharing the pound, which is as much

our currency, and it is certainly more than it is than George

Osborne's, but we are entitled to share it as much as people in London

are. If you claim ownership over the currency like Ed Balls and George

Osborne, unfortunately you claim ownership of the debt of the United

Kingdom. No serious politician would argue that process. That is why

people in Scotland are seeing through the bluff and bluster. When

Mr Barosso came into the studio, I was surprised how steely am sure he

was about Scotland not being able to enter the EU. -- and sure. He was

certainly would not happen and he said he was speaking the many other

big European heads. Why do you regard this as Unionist bluster? He

has no particular dog in this fight. I think perhaps he has, and we will

come to that in a second. Mr Barosso's comments have been

attacked since by director generals of the European Union, Secretary

generals, people in the court of justice like Sir David Edwards. He

has actually united opinion against this. Go ahead. He will certainly

soon be a former person as well, but I was interested in the remarks in

the French national assembly and the French Senate this week where French

senators pointed out that they believe that President Barosso was

being influenced by his potential future candidacy for Secretary

General of NATO and was sucking up to London in order to advance the

process. I have no idea if that is the case, but what I do know is that

serious people, Secretary generals, former presidents and former judges

in the Courts of Justice have pointed out why you cannot exclude

from the European Union citizens in Scotland who have been part of it

for over 40 years. It would be totally ridiculous for the European

Union not to accept the democratic wishes of the Scottish people.

Again, of course, it comes back to the question of the process we are

having in Scotland, a consensual referendum agreed by Pope parties --

both parties, which means that there is an obligation on others,

including in London, and indeed President Barosso, to accept the

verdict of the Scottish people. Otherwise, the whole argument being

placed about the superiority of this process compared to what is

happening in Crimea dissolves in a puff of dust. I think it would be

quite hard to get back in. But let's move on to the other big question,

Theresa. -- Theresa. Can I examine that for a second. This is the

Andrew Marr analysis then? Having spoken to Barosso, as you haven't.

As opposed to the weight of evidence presented to the Scottish

Parliament's committees at the present moment, is that an

individual expression? I have no particular view on this and nor does

the BBC. I was simply reflecting. You said what you opinion was! I

said it would be difficult having spoken to President Barosso. We will

one day be former people. But he is currently the president of the

European Commission. It is not a small job. Andrew, I thought you

asking questions. I mistook you there. I thought you were giving

your opinion as opposed to the opinion of President Barosso. I put

the weight of other people's opinion, the citizens of the

European Union, who have been per 40 years, I would say they have

acquired certain rights. And the democratic imperative of people in

Scotland than in London, even into Brussels, to accept the democratic

verdict of the Scottish people must be there. It is not just in the best

interest of Scotland, and I think that the wider continent of Europe

it would provide an imperative that is more important than the

individual views of President Barosso, and any views that may or

may not be held in the BBC. The Tories down here want a tougher

immigration policy. An independent Scotland would want a more liberal

immigration policy. Therefore, the Home Secretary says there would have

to be controls on the borders between the countries and you always

said that would never happen. Why is she wrong? We have had a Common

travel area in these island since the 1920s, which encompasses

Ireland, the Isle of Man, which are not in the EU either. There are

differences between Irish immigration policy and immigration

policy in the UK but that has not stopped the Common travel area

working. The sort of proposals we are putting forward, like allowing

international students, if they still choose to work and contribute

to the Scottish economy, proposals that are perfectly compatible with

having a Common travel area. I think Theresa May is scaremongering again,

like they do on the EU, like, currency, people in Scotland seem to

be seeing through it -- like on the currency. Well, it's the

Chancellor's big day on Wednesday, his penultimate Budget before the

election, although in practice his last opportunity to make any

significant changes. Despite the recovery, he doesn't really have any

money to play with. So what will be his priorities when it comes to

sharing out scarce his resources? George Osborne is with me now. Good

morning. Can we start by talking about the nature of the recovery?

You said it was unbalanced and unsustainable. What needs to happen

to make it balanced and sustainable? The message I will give is that the

economic plan is working but the job is far from done. We need to build

resilient economy which means addressing the long-term weaknesses

in Britain, that we don't export enough, we don't invest enough, we

don't build enough, we don't make enough. Those are the things I will

address because we want Britain to earn its way in the world. You have

to look at each of those things, what can we do to boost exports, how

can we link ourselves to the new emerging markets in the world. How

can we support business investment in this country? These are not new

features of the British economy, just weaknesses that the recession

has exposed. What have we done in terms of improving it in this

period? The good news is that exports to places like China and

India are now up. That is thanks to the efforts of the government. But

I'm not satisfied. We have to go a lot further. We have to make sure we

get to the bottom of what it is that provides economic security for the

people of this country, the economic security of knowing you have got a

job and your country is earning its way in the world, and you have your

public finances under control. This is a long-term economic plan and we

have to work through it. Very many conservatives want you to scrap the

40p rate of tax to help the middle classes but you seem to be going

towards the Liberal Democrats of raising the threshold again. Why are

you doing that? I will not talk about what is in the Budget, but I'm

incredibly proud of what I've done, the Conservative Party has done, and

the coalition has done to raise the lowest rate of tax. It's taken the

lowest paid 2 million people out of tax and the benefits have been felt

by those on higher thresholds, those earning maybe ?60,000. That is a

misconception in this debate. It's not that we are only helping those

on low incomes, though of course we're, we're helping those on middle

incomes. I am happy to be helping all of these hard-working people who

deserve to keep more of their income tax. When your predecessors like

Lord Lawson and Lord Lamont say you're not doing enough to the

middle classes and the aspiring middle classes, they are wrong? My

priority has been to increase the personal allowance which I have done

in Budget after Budget. We will have a ?10,000 personal allowance from

next week. You are taking a lot of people out of tax, but you are also

helping those on middle incomes. Sometimes when you look at this

debate, you would get the impression that somehow increasing the personal

allowance only helps people on low incomes. It helps people watching

this programme whether they earn ?20,000 or ?50,000. It's only a the

people above ?100,000 who don't get the benefit, so it's an effective

instrument making sure hard-working people keep more of their money and

I'm proud to have been part of a government that delivered that. Huge

numbers of people have been drawn into the 40p rate, 5 million in

total. It was never intended to get that number of people in the net.

Are you going to look at this again, or is this something you just

accept, more people are dragged into it for ever and ever? We have set

out plans to increase the threshold by 1%. That's below inflation. And

because we are increasing the personal allowance there is the

initial part of your income that you get tax-free. And you benefit from

that whether you are paying the 40p rate or the 20p rate. I am a low tax

Conservative. I want hard-working people on all incomes to keep more

of their income tax-free, and you can only start to deliver something

like this if you have a grip on the public finances, if your economy is

growing, if you are creating jobs. This is because we have been able to

do these things that we've been able to afford this increase in the

personal allowance. In terms of your priorities you sound more like a

Liberal Democrat and Conservative. I don't accept that at all.

Conservatives believe in lower taxes Liberal Democrats want to put them

up. As a conservative Chancellor, I have taken 2 million people out of

income tax, delivered a tax cut that 25 million people and also frozen

fuel duty year after year. I've kept council tax rise on. Where I have

been able to avoid it, my priority has been to help hard-working

families of the country. We are not even halfway through the cuts you

need to deliver, some will be over 37% in real terms, that's right

isn't it? This country racked up a very big deficit budget and the big

question for Ed Balls is why would you give the keys back to the person

who crashed the car, but we have got to make these decisions. In the last

week you have seen us take difficult decisions on private sector pay.

That will include decisions in the next Parliament. I have set out the

size of the spending cuts required and I have also said that if you

want to try and reduce the impact on some of these government

departments, you should also be looking at savings in welfare. We

are going to introduce a welfare cap which is one way of making sure a

big part of government spending is properly controlled. Explain how

that is going to work. At the moment it is set to increase. We have a lot

of control over the education budget, we don't have control really

over the overall welfare budget. We have taken measures to bring it down

with individual payments. The cap sets a total... Would that be based

on current spending or an entirely new figure? You will have to wait

for Wednesday when I will set the level of the cap. It says to people,

if you as a government want to spend more on welfare, have the honesty to

seek Parliamentary approval. What happens if you hit the cap? You can

either try to win a parliamentary vote, explain to the public what you

are doing, or take more difficult measures to reduce the welfare

budget. There was a welfare crash, and then we discovered there was a

system we couldn't only not afford but also we have these perverse

incentives that made it better for some people to stay out of work. We

are changing that and the reforms we have brought in I think are one of

the most progressive things any government has ever done. Ed Balls

said one of his priorities was house building. Have you got

house-building plans ahead? Our Help To Buy scheme has helped people get

into their own homes, we will now extend that to the next decade

meaning 125,000 new homes. We are also going to build a garden city in

the Thames estuary, this means more homes, more aspiration for

families, more economic security and resilience. What is the scale of

your house-building ambitions? Ed Balls is talking about 200,001 year.

We we -- we will be extending Help To Buy. In Epps fleet or everywhere?

Across the country. We know that local people want to see

regeneration. We have a stop on the high-speed line to the Channel

tunnel so it is closely linked to London. It will be a proper garden

city so it is not something this country has attempted for decades

but that is one of the messages of my Budget. Britain has two earn its

way in the world. A lot of people have thought this new garden city

would be in Oxfordshire, or in the richer parts of the country. Why

have you chosen Ebbsfleet? It is in the south-east of England where a

lot of the housing pressure has been. Crucially there are local

communities and local MPs who support the idea. We are going to

create an urban development organisation to allow this thing to

go ahead, cutting through a lot of the obstacles that happen. Will we

see this start before the next election? There are already some

homes built, progress is under way, but it was on a much smaller scale

than what I am setting out today. If you look at Milton Keynes, our

predecessors have the ambition to build for Britain. This ultimately

means that a family who today may be in a good job can simply not afford

to buy a house and I am not prepared to let that rest. Do you think there

are ridiculous number of it only ends in government? You are

referring to the Michael Gove comment. When you look at the

achievements of this Government, turning the economy around, it will

also be improving education in our state schools. Michael has done an

incredible job. He is making the point that he wants the best

education in our country to be in our state schools and it is

something we can be enormously proud of, his achievement. If we want more

it only ends around, what about Boris? It is entirely up to Boris

what he wants to do. I have worked incredibly well with Boris Johnson

for many years. I regularly speak to him and in This Budget there will be

more houses at a site called Barking riverside which he is passionate

about so we have worked together to deliver Crossrail, to deliver the

Olympics on time, we have worked really closely together... So you

love him back in the House of Commons? Sometimes you read in the

papers that we don't get on, I read about that and it is just not true.

I get on very well with him and we are delivering for the people of

London. Would you like to see him back in the House of Commons? If he

wants to absolutely, but that is his decision. Thank you very much for

now. Now over to Naga for the news headlines. The chancellor George

Osborne has said an economic recovery is under way but told this

programme the job is not yet done and many difficult decisions lie

ahead. The Shadow Chancellor Ed Balls said that Labour would not

make any spending commitments that it could not pay for. Mr Balls said

that a future Labour government would be responsible on public

spending. People in the Ukrainian region of

Crimea have started voting in a controversial referendum. Two

million voters are being offered a choice between joining Russia or

gaining greater autonomy within Ukraine. The ballot has been

organised by the new pro-Russian administration in the region but

it's seen as illegal by the Government in Kiev and its western

allies. That's all from me. The next news on BBC One is at one o'clock.

Back to Andrew in a moment. First, a look at what's coming up immediately

after this programme. Join us live in Newcastle at ten o'clock when we

will be debating trade unions, then the ethics of animal testing, and

lastly, is religion the key to happiness? See you at ten o'clock on

BBC One. Well George Osborne is still with

me, and we've been joined again by Ed Balls. Joined at the shoulder,

says Alex Salmond. In short, lying about Scotland not being able to

have the pound afterwards because if they voted yes, you would have to

accept that. It would be a sensible thing to share the pound with the

Scottish, would it not? It is of course for the people of Scotland to

make their own decision. We will not be voting in the referendum but it

is important people know the facts. Any combination of government you

can think of in Westminster has taken the view that we cannot share

the pound, that it wouldn't work, it wouldn't be in the interest of

Scotland or in the interest of the rest of the UK so if you walk away

from the UK, you walk away from the pound, and that leaves Alex Salmond

as a man without a plan. Why not? He was pointing out the transaction

costs would be much higher, it would actually cost you more to refuse to

have them sharing the pound. Everyone I have spoken to in the

last few weeks in Westminster have been saying it would be bad for

Scotland and for the whole of the UK. It would be a crisis of trying

to keep the currency while breaking up other bonds. We disagree on the

bedroom tax and tax rates, but on this issue, I think Alex Salmond is

painting a false picture and we have to call him out on that. I don't

understand why it is in the interests of the rest of the UK to

not allow the Scottish to keep the pound. If the country separated,

that would not be great for it economic lead but if you trade to

create a currency union, would you not need much greater control over

the Scottish budget, would you not be needing to stand behind their

banks, and when you ask questions about how it would work, you come to

see it would not be in the interests for the rest of the UK or it would

not work for Scotland either. We do trade with the Eurozone and the

United States of America, there are transaction costs there but we are

not going to join the dollar so that is a red herring. You agree with

that? If you pull Scotland and England away from each other and try

to keep the pound, that is the Euro crisis in spades. We can agree on

that, and we probably also agree there are too many Italians in the

Cabinet! That's all we have time for this morning - thanks for all my

guests. Do join me again next week, but we leave you now with a rhythm

and soul band from Barcelona who arrived in the UK last night to

begin a tour starting in London this week. This is The Excitements with

their new single, ha-ha Ha. # You know! Some men think us women

are like machines! # They need a mother, a lover and a

friend! # But I can't be these three at the

same time # So I gotta tell you! # Hahaha, oh yeah, a-hahaha # ha-ha

ha, oh yeah, a-hahaha! # I've been working so hard every

night and day # Tell me what I got? Headaches and pain.

# I've been tryin' to please ya in every single way # But I just don't

see no change. # Hahaha, oh yeah, a-hahaha # ha-ha

ha, oh yeah, a-hahaha! # I've been buying you wine, every

day and night # Tell me what I got? Screaming and fights.

# I don't wanna hear that nothing's right # I'm just losing my mind.

# Hahaha, oh yeah, a-hahaha # ha-ha ha, oh yeah, a-hahaha!

# I've given up everything I had # Tonight, honey, I'll get something

back. # Hahaha, oh yeah, a-ha-ha-ha! #

Hahaha, oh yeah, a-ha-ha-ha! # Hahaha, oh yeah, a-ha-ha-ha!