20/11/2016 The Andrew Marr Show

Since the Brexit vote, it's not just the government that

As to what happens next, the whole country has been

Well, this week, with new official forecasts and the Autumn Statement

on tax and spending, the picture should

There's an old journalists' rule and it's a reliable one,

if you're in doubt, follow the money.

Ahead of that crucial statement, the Chancellor,

Does he, as the papers report, face a new ?100 billion black hole

and what's he going to do for the Jams - the just

John McDonnell, his Labour Shadow, wants him to reverse

ditch austerity and he proposes a ?500 billon investment boost.

The legendary REM have just reissued one of their iconic albums.

Michael Stipe's been telling me that one of the fans' favourite hits

If there was one song that was sent into space to represent REM for all

of time I would not want it to be that one.

And some shiny happy people

reviewing the papers on this

important weekend: John Longworth, the Brexit supporting former boss

of the British Chambers of Commerce, Carolyn Fairbairn, director general

of the CBI and - a long time friend of the show,

That's all after the news, read this morning by Christian Fraser.

Thank you, Andrew, a very good morning.

The Chancellor Philip Hammond is expected to announce an extra

?1.3 billion for improving Britain's roads in

It will be part of a bigger investment in infrastructure

spending, designed to boost the economy.

Much of the money is expected to be spent on reducing congestion,

and there'll be extra funding for a planned "expressway" linking

The first named storm of the winter, Storm Angus,

has brought heavy rain and strong winds to the South of England

The Environment Agency has issued more than 20 weather warnings,

with winds of up to 80 miles an hour and flooding expected in some

Drivers are advised to take care and delays are expected

Donald Trump has met the former presidential candidate Mitt Romney,

previously one of his fiercest critics in the Republican party.

The two men held talks at Mr Trump's golf club in New Jersey.

Mr Romney had called Mr Trump a "fraud" and a "con-man"

He described his meeting with the President-elect

At least 90 people have been killed and more than 100 injured after

Fourteen carriages were involved in the incident in Uttar Pradesh.

Rescue workers are continuing to search for survivors and

French Conservatives are voting today

in the first round of a race to choose their presidential

The front runners are the former president,

Nicolas Sarkozy, and the centrist politician, Alain Juppe.

For the first time, registered supporters are choosing the nominee

That's all from me. Back to you, Andrew.

Lots of stories today, the Daily male is leading on the Duchess of

York trying to get money from the Sting perpetrated by the fake

sheikh, the express has dashed the Observer has a story about Europe's

leaders trying to force the UK into a hard Grexit and there is a sense

that the UK's options are narrowing because a lot of Tory MPs also say

they should be a hard Brexit. The Sunday Times says that the Queen

will invite President Trump to Windsor and a moving story about the

writer AA Gill who has cancer and is getting married. Tony Blair says

that Jeremy Corbyn is a nutter and says he is coming back. We will see

how that goes. The Sunday Telegraph talks about tax raid on middle-class

salary perks. It is previewing the Autumn Statement, Philip Hammond

will talk about that. And that extraordinary picture of Ed Balls

doing his thing in Blackpool, on Strictly Come Dancing, rather

against my expectations he is the success and is doing things we had

not seen before. John. My opener, the Chancellor writing in the Sun

about his vision for the Autumn Statement and Dan Hodges riding on

Philip Hammond and how that stacks up. I think the Chancellor is on the

right track to begin with. -- writing an Philip Hammond. Talking

about infrastructure developments, Dan Hodges says this is the death of

Osbornomics. Of course Keynes said that when the facts changed he

changed his mind and he was flexible and that is what we need to do, what

Philip Hammond needs to do in the Autumn Statement. The overriding

thing of these two articles is that one of the fringe benefits of Brexit

is that it gives the UK the chance to create the best economy in the

world and this is what the Chancellor needs to set out to do,

not perhaps all in one go but in stages, creating the sort of

economic background where we end up having the best economy in the

world. But if he faces ?100 million black hole at the moment will this

kind of investment be more than a row of beans? There does need to be

some investment in infrastructure including wireless connectivity in

the UK which is lamentable. But also we need to talk about investing in

skills and training and in science and research and development and

create increased productivity and all those things that will make the

UK a great economy. But as I will come too late on the Brexit think

there is a huge opportunity to crystallise the benefits of Brexit

and do that will be a massive boost the economy. Carolyn, a view from

the CBI, chosen stories from the Sunday Telegraph. Following on from

what we might expect in the Autumn Statement, the Sunday Telegraph and

the Sunday Times, about how this Autumn Statement will focus on the

domestic economy, roads, schools, investment, committee areas John

mentioned, a lot of nuts and bolts. Yes, within difficult fiscal

environment yet the building blocks are being put in place to focus on a

stronger economy for enterprise, I agree with John it is the right

thing to do. What does the CBI feel about the dangers of Brexit, the

dangers of a smooth transmission. The challenges of a cliff edge

Brexit, the one minute past midnight challenge, it's around Customs

officials, practical things, big box warehouses... And one thing that

needs to be really understood is what that would feel like the

businesses and challenges, were that cliff edge to happen. Should it

happen or not we see politicians with their reputations bouncing back

again, not least Mr Nigel Farage, we have a story about him and Trump.

He's milking that moment. Yes, with that photo about him being the first

person from Britain to go over and meet with Donald Trump, the Sunday

express has the inside track on what they talked about, you might have

thought it would be the economy, or Brexit but no, Donald Trump has

declared war on Scottish wind farms. His golf course? Nigel Farage has

urged Mr Trump to propose wind farm developments saying they are

blighting the landscape, he probably means that they are blighting the

view from his expensive golf course. Simon Walters of the male on Sunday

has interviewed Nigel Farage, who says he wants to come back to the

House of Commons if there is a by-election in Thanet. Does he mean

that all is he being naughty? Multifactorial Peter Hitchens in the

male on Sunday has a theory that this is not really Donald Trump, he

sends a body double like Saddam Hussein. He says that it is not his

face all his smile, his shirt is not right, so he thinks he just sent his

hair! LAUGHTER

This is a faked photograph them, very good. In the Sunday Telegraph,

a big bunch of Tory MPs, former Cabinet ministers calling for a

clean Brexit. Yes, it's an important story, Steve Baker MP is probably

involved in this group, calling rightly for a clean Brexit. As the

co-chair of Leave means Leave I support this and I'm very much of

the view that as you said the beginning, the UK now has narrowing

options in this respect. The continentals want us to leave

cleanly, it will be in our interests to do that as soon as possible, we

should trigger Article 50 early to crystallise the benefits of Brexit

as soon as possible, including free trade, if we reduce tariff barriers

and could reduce the dash improve the economy,... We should make it

clear that if we try to stay in the customs union we cannot then do the

free trade deals people might want in other parts of the world. A tough

choice. You are in it or add and if you are out there is a cliff edge,

no way of getting around that but you can to trade deals around the

world. I think the choices are coming down to that. Businesses are

going full steam ahead on getting the best Brexit and the

opportunities in trade deals around the world, I was in China and India

recently, there are real opportunities there although there

is this thing of how you get there that does not create uncertainty

around regulation and what happens at Borders. Is it important to talk

it up because one IQ authority figures sounding pessimistic about

it I think it will be a soft prophecy. Confidence is important

for the economy, always and it can be a self fulfilling prophecy if you

talked only economy as some business leaders are doing. It's important to

look at the positives. They will be winners and losers in the business

community, the economy as a whole will win, although the winners will

be the ones who embrace a new and better future rather than hanging a

poorer version of what we had before. Gets talked to somebody who

is certainly embracing the positive. AA Gill with a double announcement.

He is a friend and I am lunching with him on Wednesday if he does not

cancel. AA Gill, if someone does not know, is the theatre critic and TV

critic and restaurant critic on the Sunday Times. Former husband of a

Home Secretary and severely dyslexic, which is interesting, he

has written about it, I presumed that he dictates because he is one

of the best writers around. Personally I think he is a genius

and I do not use that would often. I asked if he was going to write about

this, I thought about his cancer and I thought it would be the definitive

article on having cancer. He is obviously going to write about it.

He says that there is barely a morsel of offal not included in his

cancer, he talks about its malignancy and calls it meaty and

gimpy. This is what we can expect from him. It was found on the spine

and in the lung but what I like most about it is that he is determined to

go with the NHS because he says that there is a human connection in the

NHS. He said, my father always said I don't want to die in the trenches

and that he himself does not want to die in a change in Harley Street.

Fairly good for him. The other huge story of the week is Ed Balls as it

is every week. Again and again he cavorts ridiculously and the country

goes wild. What's going on? I love this spread in the Telegraph because

there's all this is serious stuff about Brexit and in the middle

photograph of Ed Balls who danced his socks off last night. Not very

well! That is the point of Strictly, it is the journey. It is brilliant

light relief in the middle of serious news. Power to his elbow and

his dancing shoes! On the theme of makeovers, you have the Sun. Ed

Balls dances as well as I do! My wife will attest to that. The

makeover, it is about how people project images onto the famous. I

remember an interview with Margaret Thatcher in early days, repeated

were apparently she never wore a twinset. And yet the twinset and

pearls and had was how she was always represented. -- the twinset

and pearls and a hat. It is about why it is important to identify

their characters. Boris has had his haircut recently I believe at Harvey

Nichols and he is looking very smart. He still does not think every

time. Despite what everyone thinks they are real people. The final

about Japan. According to research by the

Japanese government 30% of single women and 15% of single men are

falling in love with virtual characters in the game, memes, half

the number of people who fall in love with a pop star, and there are

hotels they can go to and the subculture to go to with their meme

console partner for a romantic break. It is worrying, when I see

people in restaurants both on their phones, not talking to each other

but talking to other people and it is worrying. Is it you, Andrew, or

are you a cyberbot. As long as I am attached to the mains electricity

I'm fine. Overnight Storm Angus has been

drenching and battering most Freezing fog is in the North

and there's snow on the hills. Helen Willetts is in

the BBC weather centre. It has been an interesting morning,

wild weather around, Storm Angus is starting to blow out but there are

warnings for another hour or two, the ample warning of damaging winds

from the Met office but as you mentioned it has been a triple

whammy with the rain as well. Still an hour or two with strong winds,

severe gales in the South and East and the Isle of Wight, Kent and

Essex. The heaviest rain is across East Anglia moving towards

Lincolnshire. This is County Tyrone, the opposite in Scotland and

Northern Ireland where it is winter, temperature is the lowest they have

been so far this season, freezing cold mailing whereas Angus moves

into the North Sea and things quietened down dramatically for

England and Wales, but it will be cold in the north and where the

freezing fog lingers. We can only breathe a brief sigh of relief

before the next area of low pressure starts bringing more rain into

similar areas across southern England, Wales, overnight, and

marching northwards through the Midlands and East Anglia. Another 30

millimetres of rain, similar to what we have seen already overnight on

saturated ground, and it will turn readily into snow over the hills,

and I and foggy problems further north. In rush hour tomorrow with

freezing fog in the north and the ice and driving rain on the winds

and hill snow it looks nasty and there could be further flood issues

from the rain, this is the flood warning line. Stay tuned to the

forecast if you have plans, particularly tomorrow morning.

Andrew. Keep glued to the forecast.

Now I'm joined by one of the Queen's Privy Councillors.

The former republican firebrand and now Shadow

Congratulations, Mr McDonnell. The Right Honourable John McDonnell.

Congratulations. You have backed the spending of 360 million on

Buckingham Palace. Is that really write? Is it correct how wealthy the

Royal family are the taxpayer is picking up the bill at this

difficult time? It is a public building, public monument, it is a

heritage building and we have to invest in it to preserve it. If the

Queen or Royal family considered a contribution I would not send the

cheque back. It does show, though, that when we need the money for

buildings and maintenance we can afford it so we should be building

homes and tackling maintenance problems ordinary people have got as

well. Can I just say this as well... Given the wealth involved, should

they be paying for this? That is for them to consider, it would be

welcomed. I would say this gently as well, if it is a public building it

would be a nice touch if it was opened up to the public free of

charge a bit more as well. Very interesting. Let me turn to the big

picture. You've talked about fiscal credibility plan, your party is way

behind the Tories in terms of public trust on the economy so you need

public credibility. Explain the fiscal credibility plan. We have

been behind the fiscal credibility ever since the crash in 2008 and it

hasn't changed since then so we have to build up our credibility. What we

have said is the existing fiscal framework the government has used

has failed and they know that, it has been six wasted years, the

deficit was supposed to be limited last year and it is now 45 billion

and that is 1.7 trillion, they've added 750 billion to the deficit

virtually. We need a fiscal credibility rule that says, yes, you

bring down the deficit on a rolling five-year programme. Balance the

books over five years? Yes, in other words you spend what you earn, but

in addition you make sure the debt is coming down. But the most

important thing is you do not stop investment. What I've been worried

about is that over that long seven-year period our investment has

actually stagnated so we have a productivity crisis, stagnating

again, meaning we are not earning Karawe. We are talking about ?500

billion? Let me explain that. -- not earning our way. It is compatible to

the 1990s. 500 billion over a 10-year period, 250 billion from

mainstream programmes, so investing, infrastructure, roads, rail, new

technology, decarbonising our economy. But then we want to set up

a national investment bank. This is what happens in Europe. You put

money into that and it levers 250 billion from the private sector. So

at what point do we get the money back because of economic growth?

Economic growth, I think, would come fairly rapidly because there has

been... Let me give the example of what has happened under the existing

government. We have had an infrastructure pipeline and only one

in five projects is meeting construction targets. We have had 35

billion identified by George Osborne ready to go, shovel ready projects

that would grow the economy. Also remember, Andrew, our borrowing

costs are at the lowest in a generation. People say it is the

time to borrow money. Nevertheless, what rate of economic growth would

you need for this gamble to work? It is a gamble because you do not know

you will get the growth. What extra level of growth would you need? My

view is 1% or 2% extra growth and we would really be burning and really

buzzing, and in that way this is about investment infrastructure. But

it is also investment in people as well. 2% extra growth beyond what we

would normally get, is that what you're looking for? 1% or 2% is

achievable. That would bring money back to the taxpayer in what period?

Remember it is a ten year programme, remember we are at the lowest rate

of borrowing in a generation and that would give us the opportunity

to actually modernise our economy and become competitive in the world

against. We have slipped down the league table. Payback in ten years

with 2% extra that's interesting. Let me ask you about this, Keynes,

when the facts change I change my mind, what, sir, do you do? If we

get high inflation, seeming likely with where the pound is, and if we

face a ?100 billion Brexit black hole as the papers say, would that

change your thoughts, would you borrow less or more? I am not sure

if the 100 billion is accurate, we are told it might come down when we

get the reports in the next few days. This is the time to invest to

grow the economy. You cannot put it off, the government has put it off

for six years. What happens if interest rates go up? The interest

rate increases the cost of borrowing and you would build that into

whatever cost, borrowing you took up. I'm on the same page as the CBI,

the Chamber of Commerce, as virtually every economic metric.

Moving on to the current account, you said you want an end to

austerity, do you mean reversing the government's welfare cuts? Let me

explain this very clearly. Where we are at at the moment is, I think

people recognise that we have an unfair tax system where we have had

tax giveaways to the wealthy and corporations, tax evasion and tax

avoidance. Will you change it to a fairer tax? Yes, we would hold the

tax cuts to the rich and corporations and reverse some of

them. We would seriously tackle tax evasion and tax avoidance. In that

way we would have the resources to invest in our public services. The

issue around being competitive isn't just about physical infrastructure,

it is investing in people as well. Our schools budgets are going

through cuts we have not seen since the 1970s. That is a short-term cut

for a long-term failure. Let me ask about the cuts, you said you would

reverse the welfare cuts, around ?12.5 billion, ?13 billion. Let's

look at the figure. That is what the government quotes. Let's look at

what we are talking about, Universal Credit, we hope the government will

reverse that, in the first stage of our reversal of austerity, ?30 a

week cut to disabled people desperately seeking work would be

reversed, that would be the first stage and I hope the government does

that on Wednesday and if they don't we will. What about the cuts to

unprotected government departments in local communities and so forth?

Will you reverse those? We will try and invest back in local government

as we grow the economy and that means investing around the country.

At the moment there is investment in the London and the south-east and

that is why the investment bank will be a regional bank. On the current

account we have a ?70 billion deficit roughly speaking and if you

add to it somewhere between 15 and ?20 billion of reversed cuts you are

talking something like 80- ?90 billion that you have to fill,

either through growth or tax rises. Simply dealing with it by putting in

more tax inspectors will not plug the gap, nobody thinks that. No. You

have to raise proper, real taxes. If you had a fair taxation system and

were not giving the tax giveaways to corporations and the rich, if you

seriously tackle tax evasion and avoidance, and grew the economy, we

would be able to afford our public services. What about raising the

threshold on the 40p rate? In favour or against that? It looks as if the

threshold will be increased on Wednesday by the government and we

would support that. We would support that. That is a tax giveaway in a

sense. Some of the people need a tax giveaway at the moment because of

the mismanagement of the economy by the Conservatives, it is hitting

them hard. But we need a long-term strategy. This Autumn Statement we

are going back to giveaways and gimmicks again, a lot of the

infrastructure I've heard the government is supposed to be

announcing, we've already had the press releases. It was said in the

papers that Philip Hammond is reversing Osborne -omics and they

are ditching austerity and going back to investment. Do you accept

that, or are they just not doing enough? Loss of this will be

gimmicks and press releases all over again, as I've said, in the pipeline

with only seen one in five delivered to construction. A lot of this will

be repeats of what we are seeing already. Some of the issues around

infrastructure like research and development is simpler replacing the

cuts that they have made over recent years. It is a change in direction

nevertheless. It is a minor change in direction when this Autumn

Statement should be a significant reversal of existing economic

strategy. We can put this to him in the sofa chat later on. Let me ask

about Brexit because as I understand it Labour's position is the version

of the Brexit Theresa May is going for which doesn't necessarily

protect workers' rights and wouldn't give full access to the Single

Market would be disastrous for this country. I oppose the Tori high

Brexit they are putting forward. And yet you are telling Labour MPs to

vote for Article 50, which suggests there is the cliff edge, let's go

towards it even more. Not at all. A referendum has taken place and we

must respect that decision, I voted the campaign for Remain and we lost,

we have to respect that decision. We don't want to be accused by not

voting for article 52 try and somehow overturned a referendum but

the serious negotiations will start taking this afterwards. Do you want

the chance to amend the government's plans? We have got to. How do you do

that? We campaign in the country, make sure we form coalitions across

the House of Commons, and we get serious negotiations going. The

House of Commons is the only way? As we move into the negotiations we are

demanding the government comes back and is held to account and held to

account in Parliament and to the country overall about the promises

they make in that period. Would just need to know where the government

wants to go and how it will get there. We have a view that eight

Tory high Brexit would damage our economy and we have two sees

opportunities to create a new relationships with Europe and with

the social Democrats across Europe to create any relationship that

tackle some of the problems that voted for people to vote for the

referendum. We will talk about this later but thank you for now, John

McDonnell. It's 25 years since REM released

that great album, Out of Time. It made this most political

of American bands into a global phenomenon which lasted

until their friendly split in 2011. They've just released a special

Anniversary Edition of Out of Time. It includes a remastered version

of the album, and much more. REM's vocalist Michael Stipe,

now sporting a massively impressive beard, and bassist

Mike Mills joined me earlier. It's a proper length of time

for technology to change enough to where you remaster

it, you can actually make it sound, maybe not better

but certainly a little clearer to hear things you couldn't hear

the first time. It's certainly enough time for us

to be OK with looking back at something we've done, which is not

normally how REM operates. How would you define the REM sound

because it is distinctive? Well, clearly for many years

it was dominated by the sound of Peter's guitar

because he played in He didn't play block chords,

he played arpeggios, And then, of course, Michael's voice

with was the signature sound of REM. And then, of course, Michael's voice

was the signature sound of REM. So Michael's voice was the thread

that carried through, through whatever other changes

we went through. But at this point we decided

to change the guitar sound I started playing more

keyboards than bass, Bill Berry started playing things

other than just a drum kit. We just shook things up

as much as we could. and absolutely loving it at the

time. But like a lot of people,

I didn't really understand it. Can we talk about a

couple of the songs? Losing My Religion is not

about becoming an atheist. So what does losing my

religion actually mean? It's a southern term that means that

something has pushed you to the point where you're

questioning your faith. And it's used quite casually in

the south. It's not

something that would actually question your faith, it just means

that it rained and you got your hair wet, or the lunch you ordered

wasn't as good as you So essentially you're just

losing it? Now, it's famously

said, I think by both of you, in the past,

that you really dislike one song on this

album, Shiny Happy People. Very, very weird for people

to have a hugely successful hit and then say, "Do you know what,

we don't like that song." But it's a fruity pop song

written for children. that was sent into outer space

to represent REM for the rest

of time I would not want it Mike Mills, you said recently that

you were watching U2 in a big stadium event

and thought, do you know what, I could be up there,

I could be doing that. And then you thought, nah,

I don't want to do it. You know, for the first two

or three songs I really missed it and I said,

because I know how much fun that is, and I was thinking I could

still be doing that. And after about three or four songs

I started thinking about, they've got another six

months of this and I get to go home and read

And I realised that we broke up at the right time

for the right reasons, and what little I'd missed

if it was not nearly enough to overcome the

I must ask you, are you haunted by the

albums that you haven't made over the last five years, the songs that

Do you think, we could have been doing this?

I'm haunted by the albums that we did make!

CHUCKLES In capping the band with our last

day and the way that we made that announcement, I wanted to preserve

the legacy of what we had created and spent 32 years of our lives

I did not wanted to drag down into us in our mid-50s going on

tour, becoming something other than what we were.

You always wanted your songs to have a meaning beyond

Just tell us a little bit about the politics surrounding

The moment itself, we were looking, if you look at all the

things that were going on here and in the US

in 1990 and 1991, it was

the end of Reagan and Bush, the end of Thatcher,

it was the end of Aids as a death sentence.

We were now discovering medicines that could

And I think as artists, as creative people, we instinctually

were responding to a change and trying to address it in the way that

we approached the making of this record.

And there is certainly a lot of change in the air right now.

What was your reaction to the Trump victory?

You weren't Hillary supporters either of you, were

I was also a Bernie Sanders supporter.

I campaigned hard with Bernie Sanders.

I support and stand by what he said in the New

He did an op-ed saying that if this administration is going to work for

the working class of America then he stands behind them 100%.

If they're going to present even a shred of

intolerance, whether it be towards women, Muslims

or homosexuals, anyone, then he will stand in their

This was not a vote for racists or misogynists

or sexists, or people of intolerance.

It was a vote against the establishment.

And Donald Trump just happened to be in that

People were voting in a protest and Donald Trump was

Almost all of Hollywood, most of the major rock

stars that we hear about, were with the anti-Trump candidates of one

kind or another, and America turned her back on,

Do you think there is a moment for people who are culturally powerful

to say, do you know what, our involvement in politics has not

That's a possibility, but when people, I'm on

Twitter, and when people come at me with that,

should be involved in politics, truck drivers, dentists, housewives,

anyone at all, whatever your job, you should be

If we happen to be pop stars with a bit

more of a platform than others I don't think that should in any way

I have an opinion, I have a platform, I'm on TV.

Truck drivers aren't on TV talking to you about

If you disagree with my opinion, fine, if it makes you not

But I'm a person who, I'm an American, I'm

New Yorker, I'm kind of frankly horrified by the past couple of

And so if I feel the need or the desire to

express that opinion I don't think anyone should tell me that I can't

Michael Mills, Michael Stipe, it's been great talking to

After the budget, the Autumn Statement is the most important

We'll get the first proper official forecasts about the economy

since the Brexit vote, and the Chancellor,

Philip Hammond, gets to respond to the Prime Minister's promise

that the Jams - the just about managing people -

on low incomes will be the new government's top priority.

Philip Hammond, welcome, can I ask you how you define the Jams? They

are people who work hard and by and large do not feel they are sharing

in the prosperity that economic growth is bringing to the country.

We have to make sure that the prosperity that comes from seizing

opportunities ahead is shared across the country, and across the income

distribution. In terms of income they could be between ?20,000 a year

to ?36,000 a year? I don't think it is about

income, it is about the way people manage their lives, people who feel

the system is not supporting them enough, not working for them. When

Theresa May became Prime Minister she, as it were, looked these people

in the eye and said, you will be my top priority. You agree? Absolutely

right, and what we've done in the past few years, creating millions of

new jobs is a good start because for these people the most important

thing they have is a secure job. And making sure that those jobs remain

secure as a key priority as we go forward. I know you can't go into

details about the Autumn Statement but whatever you do you cannot make

those people worse off now. Not after what you've said. We don't

want to make anyone worse off, we want to secure the gains we have

made in the last years and recognise that in the next couple of years we

will face uncertainty of the economy but then we will have a raft of

opportunities and we need to get the country ready to seize those. So you

know where I am going, the only conclusion we can draw is that you

need to reverse the cuts you've made to universal welfare support or if

you don't these people will be hundreds of pounds worse off. I

won't go into details of the Autumn Statement I'm going to make on

Wednesday but you've seen the forecasts, the range of independent

forecasts. We'll get the OP are forecast on Wednesday. And many of

those pointed to a slowing of economic growth next year. And a

sharp challenge for the public finances, there are a range of

reasons for that, and we have to make sure that what we do is

responsible, that everything we do is compatible with building

resilience in our economy as we go into a period where they will be

some uncertainty over some negotiation of our exit from the EU

and make sure that the economy is fit for the opportunities and

challenges ahead. You could be turning to those Jams and making

them worse off by sticking with George Osborne's benefit cuts. We

need to maintain our credibility, we have an eye watering a large debt

and still have a significant deficit in this country and we have to

prepare the economy for the period that lies ahead. I want to make sure

that the economy is watertight, that we have enough head room to deal

with any unexpected challenges over the next couple of years and most

importantly that we are ready to seize the opportunities of leaving

the European Union. That means improving the productivity of our

economy so that we can compete in the world. There's an eye watering

the large figure of ?100 billion as a putative deficit as a result of

Brexit, much discussed in the papers. Do you recognise that

figure, is there a big deficit Black hole that you as Chancellor facing?

I read the forecasts by independent forecasters. The one I have to

respond to on Wednesday is the definitive one that will be produced

by the Office for Budget Responsibility and until we see that

I can't comment on how I will respond to it. Have you had

conversations with the OBR? It is a strange situation, they have to

forecast what happens to the British economy over five years which means

after Brexit. So on what basis can they make a forecast given that the

government doesn't know how you would deal with it? This is why

there is a larger than usual degree of uncertainty over the economy for

the coming years and it will be for the OBR to explain in their report

how they have dealt with that higher degree of uncertainty. But of course

we do not know exactly where we will end up at the end of that period of

negotiation. Isn't it an almost meaningless process? If you have not

given them specific information about what you intend to do than

they are making the same kind of gas that anyone watching this programme

could make. So there is no particular reason to think that

their ?100 billion black hole is real or anything else. It isn't

about us giving them information, we will be entering negotiations with

our EU partners about the terms of our future relationship with them.

It isn't about the government's view of the outcome, it is about where

those negotiations end up after a couple of years of hard fought

negotiation. We will get the very best possible deal that we can for

Britain but the OBR will have to make its own judgment about where we

are likely to end up and how it will affect the economy. I want to keep

things simple but basically the choice between leaving the EU

Brittany and staying inside the EU there's very little middle ground,

the European leaders are being tough in what they say, but if you want to

stay in the customs union and the free market you have to accept

things, like it or lump it, and Tory backbenchers are ganging up to the

same kind of outcome. The sense that there's a middle way of being inside

the EU or outside seems have vanished. I don't accept that sense.

What we are seeing in Europe is a disciplined approach to their

opening position. We have explained repeatedly and I do understand the

frustration about what we're thinking of doing, how we to conduct

the discussions, the Europeans are very disciplined and keeping cards

close to their chest to maximise their negotiation advantage and I

want to make sure that Theresa May goes into these negotiations with

all the cards in hand, with maximum negotiating flexibility so that she

can play her hand to the maximum benefit of Britain. Those who urge

us to reveal our tactics will undermine this. Yet we need to know

where we are going as a country. Not if we leave, when we leave the EU,

is it important that we set up our own trade deals around the world

with America and Australia and other countries? Of course we will have

new opportunities when we leave the European Union, and over the course

of the negotiation we will discuss various options, various

combinations of outcomes. Surely we will be able to have our own deal?

Our key issue is to get the past Wood best possible deal for the UK,

reddish companies, British businesses and we need to get

maximum flexibility, we need to approach these negotiations with an

open mind yet a single clear objective, getting the best for

Britain and the British people. Yet this suggests that after Brexit we

might not be able to do our own free deals with other countries because

if we stay in the customs union we can't do that so maybe Boris was

right when he said that we probably would leave the customs union. I

simply do not think it's helpful us to go into a negotiation having

unilaterally declared certain things we will or will not do. I think we

should go in there with one single clear objective, we are leaving the

EU. The terms of our future relationship with the European

Union, our future relationship with the rest of the world, on the table

and we should be prepared to discuss all these things with the clear

objective of getting the best possible deal for Britain, to

protect the British economy and protect the living standards of the

British people. You yourself said the only honest alternative to the

EU was WTO rules, does Philip Hammond still with Philip Hammond?

They are the straightforward default options if we were to leave the

European Union without any agreement with our neighbours in Europe about

access to their market and access to our market. Both sides have huge

things in this game, we trade huge amounts with each other and I'm

confident we will reach agreement with our European partners that

ensures our companies will continue to trade in and have access to

European marketplaces. And yet that cannot happen unless we compromise

on free movement. Every single European leader has said that. The

Mane charge of the negotiations has said that there is no reason to

think they are bluffing about this. Well, as I said earlier I think the

Europeans are being commendably disciplined in the line they take,

that this will be a negotiation. We will have our opening positions,

they will have their opening positions, it will be a long and

hard fought negotiation but I'm sure, because logic dictates that we

will, that we will eventually come to an agreement that works both for

us and our European neighbours. This is not really about the government

hiding its hand from the Europeans, is about the government hiding its

hand from the House of Commons because the government, cabinet and

Conservative Party are deeply split between the high Brexit people who

want WTO rules and get out and that's it and people like yourself

who would like to negotiate something in between current

membership of the EU and simply relying on the WTO rules and that

split cannot be allowed to be seen visibly in the House of Commons

because your party will fall to pieces. I think you would be

surprised to the degree to which the Cabinet is coming around to the view

of the challenges and opportunities we will have as we move this debate

forward but doing a huge amount of work. David Davis's department, Liam

Fox's department, we work closely together. Some of the message we

hear from people who haven't gone into these issues in such great

depth frankly belies the complexity of this issue. We all want the same

thing, we want to get the best deal we can get. The best deal, I am

hearing this, I get it. How important is it? You see the money

coming in, how important is it to this country that we retain the

banking sector in more or less the same state as it is at the moment in

London? Financial services is a very important sector of the UK economy.

A significant proportion of Britain's financial services

industry is generated through trade with the European Union. By the way,

the City of London provides a vital resource to businesses,

manufacturers and farmers across the European Union. Absolutely.

Maintaining that access will be very important to us and it will be a key

demand in our negotiations. A key demand. And right now finance

ministers in France and Germany are making moves to lure people to

Frankfurt and Paris and we cannot give any real assurance whatsoever

to the banks based in Britain about passporting writes. Is there

anything more you can say to make them stay? I talk to major banks and

financial institutions in London on a regular basis and of course we

provide them with reassurance and also the fact we will argue strongly

for maximum access for financial services during these negotiations.

This will be a long process and part of this process will be about the

Europeans themselves thinking very carefully about what they want

because some of what I'm hearing from European politicians I

understand in terms of political rhetoric, but doesn't make a lot of

sense in terms of... You still think they are bluffing? It is not a

question of bluffing, it is a question of understanding the

challenge of hosting a very large banking sector, for example,

understanding the value that this deep and complex ecosystem of

financial and professional services in London delivers to the whole of

the European Union, and working with them to find a way that works for

both of us. It has to work for Britain and the European Union,

because this is a negotiation and it has to be a win-win outcome. You

used the phrase match fit earlier about whether the British economy

has to be after Brexit. There is a huge productivity gap and we have

many problems in the economy. To what extent will you resolve this

with major new infrastructure spending, and spending on fibre

optics and the rest of it? Well, I'm not going to reveal what I'm going

to say on Wednesday. Go on. But this is about choices. We don't have

unlimited capacity, as one might imagine from listening to John

McDonnell, to borrow hundreds of billions of pounds more for

discretionary spending. That simply doesn't exist if we are going to

retain this country's credibility in financial markets and remain an

attractive place for business to invest and create jobs. But we do

have to make choices and it is very clear to me that as we move on from

being members of the European Union to owning our living in the wider

world we do need to address the long-standing productivity challenge

in this country, and that means investing in R, investing in

economically productive infrastructure schemes. Roads,

railways, that kind of thing? It means all of the network

infrastructure, but in a modern economy, a knowledge-based economy,

it goes much further than that. It is about ensuring we have the

science base, the knowledge base, that can build the kind of fourth

Industrial Revolution businesses that we need for Britain to be

successful. Are you still committed to having workers on the boards of

big companies? We want to ensure that the voices of consumers, the

voices of workers, are heard in the boardrooms of Britain, we think that

makes sense, we think that is good corporate governance and we will

discuss, we discussing with business how best that can be achieved.

Finally, can I ask, I asked John McDonnell the same question, is it

right that we are spending so much money rebuilding Buckingham Palace

when things are so tough? This is a grade one listed building an

important and iconic monument, a key element supporting Britain's hugely

important tourist industry. It is also a building owned by the

government. We have responsibilities as a government when we own heritage

assets, and this building... The Royal family is very wealthy, should

they not be contributing? This is a public building. It has not had its

services renewed since the early 1950s. It is frankly a hazard. There

is fire risk, there is flood risk hazard from the decrepit state of

the services in Buckingham Palace. It is never an easy decision to

make, but like the decisions that are being looked at around the

Palace of Westminster and other iconic historic heritage buildings,

that is fading away before our very eyes, sometimes we have to make

these difficult long-term decisions. We will talk more in a moment but

for now, thank you very much indeed. Now for a look at what's coming up

after this programme, Thank you, Andrew. Coming up on

Sunday Morning Live, a 14-year-old girl who died of cancer has been

cryogenically frozen in the hope of living again.

We examine the ethics. Prison officers warn of overcrowding and a

volatile situation in jails. We ask column should we put few people

behind bars? And as he prepares to leave strictly

come dancing, Len Goodman talks about life beyond the glitter ball.

Join us at 10am. I've got both of you on the sofa

again. I'm delighted that both

John McDonnell and Philip Hammond have joined me together on the sofa

to talk to each other Can I ask about your MP colleague

who is leading the charge for what they call a clean Brexit? Something

that you party now wants, what's the problem with it? The problem with

constraining the Prime Minister is that we give away our negotiating

cards before we've even started the negotiation. I believe that the best

way to support Theresa May to get the best possible deal is to go into

the negotiations with the maximum flexibility to play her hand

carefully and to come out with the best possible deal for Britain.

These Tory MPs making noises should back off and shut up? I would urge

my colleagues to give the Prime Minister the flexibility she needs

to get the best deal for Britain in what will be a very complex

negotiation. I don't think this is about negotiations with the

Europeans, I think it's about negotiations within your own party

and all we are asking for is what is the vision? Where do you want to

arrive at? What is the objective? I listened to the interview, it is

about as clear as mud. Even your own side are now saying, tell us where

we are going. You are not giving away your negotiation position. When

will we know? This is a negotiation, we know where we want to end up. We

want to end up with the best possible access to European markets

for British firms, the products of British workers. Is that tariff free

access to the Single Market? We want European workers and European firms

to have continued access to the UK's market. I will not set out any red

lines around that. I'm prepared to see a wide-ranging discussion. That

is why you are having the rows in your party. We will have it --

bespoke solution. You will not get an answer. Let me ask about the

benefit cuts. I know you don't want to give a statement ahead of the

Autumn Statement but nevertheless it would be a big blow to a lot of

people who have been told by your government that they are the main

priority if you didn't do something. Are you going to change direction?

We have had to make some difficult decisions to deal with it legacy we

inherited from Labour, a massive deficit, over 10% of our GDP. And

over the last 30 years in work benefits system costs have spiralled

out of control. They have tripled over that period in real terms.

Wages have been so low. Welfare spending has had to play a part in

the fiscal consolidation, along with all other areas of government

spending. We made a manifesto commitment to reduce welfare

spending by ?12 billion. We have made a commitment... We will not

take any further measures to reduce welfare over and above those that

have already been announced. This is money coming from people who have

done everything asked of them, trying to work, but after their

families, I will ask you this. Will you change direction? If you reverse

the cuts to Universal Credit and the custody ?30 a week for ESA, you will

have my support. John, what I have not heard from you, is where you

would get the money from to do these easy options? I would stop the tax

giveaways. These are easy options you talk about. I would stop the

Capital Gains Tax giveaways, stop the giveaways to corporations. We

now have the top 10% of taxpayers making a higher contribution to

taxation than they did at any time under the last Labour government.

Let me tell you, the IFS, said the bottom 10% have 25 times been hit

harder than the top 10%, that is the IFS. Given these figures... Give us

this and you will have our support. I will not make Britain and an

attractive place for businesses to invest, for businesses to start up

and grow. You are cutting benefits for people in work. These are people

working to make our economy well. Given the figures you have been

saying, why is it he is trusted more value over the economy? Those

percentage figures in the polls have been consistent since 2008 because

Labour were in government when the crash happened and we haven't

recovered. They think you spent too much then. Whatever the discussion

is about opinion polls, the actual benefit cuts to people in work and

disabled people is more important than party political points. We will

support you if you reverse it. We have heard all of this from Labour

before and we know where this approach gets us. It is not party

politics, we have to be bipartisan, you don't have to harm these people

are working hard to get by, and how disabled people. It is easy to sit

on the sofa and pretend there are no difficult decisions to make. I know

there are difficult decisions. I want to speak to you about the Boris

Johnson Customs union, and, is it helpful or not helpful? We have not

decided on customs union. That will be one of the issues that is in

play. A period of silence would be gratefully received by his

ministers. That could be said about the entire programme!

LAUGHTER Andrew Neil will be here in an hour

with the Sunday Politics when his guests will include two

of UKIP's leadership candidates,