:00:00. > :00:00.Excellent. Now, in the run-up to today's statement we had some dire
:00:00. > :00:17.warnings about the of spending cuts. Good afternoon
:00:18. > :00:19.and welcome to a special edition The Chancellor sets out ?20 billion
:00:20. > :00:25.worth of budget cuts, but cancels his planned tax credit
:00:26. > :00:39.cuts in his spending review. The guardians of economic security,
:00:40. > :00:44.the protectors of national security, the builders are better
:00:45. > :00:51.future, this Government, the mainstream representatives of the
:00:52. > :00:54.working people of Britain. Here at Westminster, we'll be getting
:00:55. > :00:55.reaction and asking all the headlines today the real stories
:00:56. > :00:58.behind the Autumn Statement? Well, George Osborne certainly made
:00:59. > :01:00.a stir, even if it was by announcing he won't do what
:01:01. > :01:03.everyone expected him to do. Your first box? You are hearing
:01:04. > :01:34.Lords on his proposals to cut tax Your first box? You are hearing
:01:35. > :01:38.there that this is not quite how it was dressed up in the July budget.
:01:39. > :01:42.George Osborne has found some wiggle room with the help of higher tax
:01:43. > :01:47.receipts and very low interest rates ensure that he is not being nearly
:01:48. > :01:50.as much as had been expected to payoff that colossally large
:01:51. > :03:57.interest on the national debt. explain to his backbenchers why...
:03:58. > :04:05.Only for a year that they breach the cap will stop yes. In the first
:04:06. > :04:10.years of the Parliament. Housing benefit is going to be capped in
:04:11. > :04:12.particular. Then there is the question of public spending which is
:04:13. > :04:16.what was going to be watched particularly closely in addition to
:04:17. > :04:20.welfare. Capital spending is going up. You speaking a what about
:04:21. > :04:24.housing and there will be a consequence for the Scottish budget
:04:25. > :04:28.from that. Health is protected. Police in England is also
:04:29. > :04:31.protected, police spending, and schools as we expected, are
:04:32. > :04:35.protected as well. The departments that are not protected are taking
:04:36. > :04:41.colossally big cuts. Business down by 15%, environment down, energy
:04:42. > :04:46.down by 22%. That is not capital, that is day-to-day spending. He made
:04:47. > :04:49.a big fuss in the speech of saying that while this is the current
:04:50. > :04:55.budget actually in a lot of these areas you will increase the capital
:04:56. > :04:59.spend. Yes. Capital spending is going up into infrastructure and
:05:00. > :05:04.housing but the day-to-day spend, a lot of it goes on to salaries and
:05:05. > :05:10.wages. That is going to get squeezed in these departments very tightly.
:05:11. > :05:13.What about the effect this will have on Scotland? As this feeds through,
:05:14. > :05:16.you have health protected, your police protected, your school is
:05:17. > :05:20.protected, but you get lots of other things that get cut. Fed through to
:05:21. > :05:27.the block grant and that means in real terms cut over the next four
:05:28. > :05:32.years by 5% in day-to-day spending. The more positive story is about
:05:33. > :05:37.capital spending. Infrastructure, which the Scottish Government agrees
:05:38. > :05:43.is a priority, 14% up on that. That is much lower than the day-to-day
:05:44. > :05:47.spending budget. It has had a very hard time through the past five
:05:48. > :05:51.years. John Swinney was able to do a bit of shifting around, but capital
:05:52. > :05:54.will now be more significant than George Osborne's budget and feeds
:05:55. > :06:00.through to Hollywood as well. We should have the Scottish loch grants
:06:01. > :06:03.coming to Hollywood could reach almost ?30 billion four years from
:06:04. > :06:13.now, but I know what you're about to say, Gordon, that is a bit of a
:06:14. > :06:18.fiction because... We're going to talk about that later on so let's
:06:19. > :06:25.give Alf a chance. It is difficult in a way because when the economy is
:06:26. > :06:29.renting, your options shrink, when the economy is growing, the wiggle
:06:30. > :06:34.room that George Osborne had is pretty high, isn't it? I think that
:06:35. > :06:38.is right and the OBR growth forecast were pretty optimistic right through
:06:39. > :06:41.the forecast period withdraws regularly hitting 2.5% or
:06:42. > :06:45.thereabouts right through the period. They are hoping in thinking
:06:46. > :06:53.and here's hoping that tax revenues will be higher. He is talking partly
:06:54. > :06:58.through a bit of shifting about about resetting and how the whole
:06:59. > :07:02.thing is measured because English Housing Association debt is being
:07:03. > :07:05.included. Here's hoping that's here's got something like ?27
:07:06. > :07:11.billion more to play with than he had in July. Whether it is a real
:07:12. > :07:19.?27 billion or the numbers have all been recalibrated, until you get
:07:20. > :07:23.into the books. Briefly, because we have to go to London. There is a
:07:24. > :07:27.problem for the opposition because even those who criticised austerity,
:07:28. > :07:30.it makes sense to balance the budget and even have a surplus when the
:07:31. > :07:36.economy is growing, as it is. In terms of where he was parking his
:07:37. > :07:40.tanks, as someone was saying earlier, it is almost as if he could
:07:41. > :07:44.have stood up and said I have learned my lesson from the tax
:07:45. > :07:47.credits fiasco, austerity is over. Didn't quite say that, but you can
:07:48. > :07:50.see that that is where he was trying to position himself in terms of
:07:51. > :07:53.leaving John McDonnell with very little to say. OK. We will come back
:07:54. > :07:55.too on. Throughout the afternoon we'll be
:07:56. > :07:57.hearing from the four main political parties at Westminster as they react
:07:58. > :08:00.to George Osborne's statement. Let's head back there now to
:08:01. > :08:14.our correspondent, David Porter. Very pleased to say it is a nice day
:08:15. > :08:23.so far so let's not tempt the weather gods. Joining me now is the
:08:24. > :08:30.secretary of state for Scotland, David Mundell. So what did George
:08:31. > :08:33.Osborne do for Scotland? I think it is a really good deal. He is
:08:34. > :08:37.delivered ?16 billion in terms of capital spending. We heard a lot
:08:38. > :08:40.over the period of projects being there to be done in Scotland to
:08:41. > :08:44.improve infrastructure. Now the money is there to do it so let's see
:08:45. > :08:50.some shovelling, because Scotland does need significant infrastructure
:08:51. > :08:53.improvements in the context of the overall settlement in the UK I think
:08:54. > :08:58.Scotland has got a good settlement, which is sustainable in terms of the
:08:59. > :09:03.Scottish Government's projected finances. I think there are some
:09:04. > :09:09.very good things in there, such as the Amsterdam roots. There is money
:09:10. > :09:13.for the Burrell collection, the city deals and we heard the major
:09:14. > :09:15.investment in Scotland and the defence industries. But your
:09:16. > :09:20.opponents will say that when you strip away all of the spin, by 2020
:09:21. > :09:23.will have meant a decade of austerity. I don't accept that it is
:09:24. > :09:31.an austerity budget when you have six in 5p to spend on capital
:09:32. > :09:38.infrastructure in Scotland. -- ?6.5 billion. I think we need to identify
:09:39. > :09:41.those projects and get them forward so we can improve the economy in
:09:42. > :09:45.Scotland and improve people's lives. People have got to remember that the
:09:46. > :09:48.SNP only a couple of weeks ago were arguing for a full fiscal autonomy
:09:49. > :09:52.and under today's goes, there are projections would have been down
:09:53. > :09:57.94%. That is billions of pounds out of the Scottish budget and no idea
:09:58. > :10:01.where that money would come from, so as part of the UK on the Scotland
:10:02. > :10:05.has got a really good deal, a stable deal, a deal that allows us to
:10:06. > :10:09.invest and move forward and that is what we need to do. Let's deal with
:10:10. > :10:17.a key political story from the statement. George Osborne shelved
:10:18. > :10:23.the planned cuts to tax credits. Noting touring comedy has decided he
:10:24. > :10:28.will abandon it altogether. -- no messing about. That is right. I
:10:29. > :10:33.think the same people who had criticised the tax credits proposal
:10:34. > :10:36.will now criticise us for making changes. The Chancellor's view was
:10:37. > :10:44.that it was to conflict to start adjusting the rings and entry
:10:45. > :10:47.rates, but because he was any better financial position with higher tax
:10:48. > :10:53.and lower rolling costs that he didn't need to make the savings that
:10:54. > :10:57.he needed at the time of the summer budget and therefore could
:10:58. > :11:03.accommodate the tax credit payments as they move forward into the new
:11:04. > :11:09.Universal Credit rating. But it is right to say now that they are not
:11:10. > :11:13.going to talk -- cut tax credits, why a view months ago did he think
:11:14. > :11:17.it was such a good idea? The position a few months ago was that
:11:18. > :11:21.the financial situation was a lot tighter. He did not cut tax credits
:11:22. > :11:25.just the sake of doing so, you did it because we are operating in a
:11:26. > :11:28.very tight fiscal situation. What has happened over the past few
:11:29. > :11:30.months is that we have seen higher tax receipts and lower borrowing
:11:31. > :11:34.costs which is meant that envelope is not as tight and it means that
:11:35. > :11:39.continuing to pay tax credits for the time being as we move forward to
:11:40. > :11:42.a Universal Credit can be accommodated within his financial
:11:43. > :11:45.projections. So does that mean if the figures got worse the tax
:11:46. > :11:50.receipts weren't so good in future comic he may come and I stress may,
:11:51. > :11:56.come back and look at this again? He's made the commitment to not go
:11:57. > :11:59.forward with the proposal on tax credits. I don't envisage any
:12:00. > :12:07.circumstances in which that would change. We are with the roll-out of
:12:08. > :12:11.Universal Credit and over time it is that that will accommodate the issue
:12:12. > :12:15.completely. Thank you very much for joining us this afternoon. We will
:12:16. > :12:16.be having more political reaction from Westminster in a few moments
:12:17. > :12:18.but back to you. So what's the reaction
:12:19. > :12:20.from Holyrood? Our political editor, Brian Taylor,
:12:21. > :12:28.can tell us. Brian, I don't expect the Scottish
:12:29. > :12:31.Government will say this openly, but do you think they are actually
:12:32. > :12:36.believed that they don't have to worry about how to ameliorate the
:12:37. > :12:41.effect of tax credits cuts? I think they are punching the air. People
:12:42. > :12:47.say it was just a political decision but I think it was entirely a
:12:48. > :12:52.calculation on part of the translator -- Chancellor and it was
:12:53. > :12:57.purely a clinical decision taken by the Chancellor and one does not
:12:58. > :13:01.blame him for that. He was any mess and has dug himself out of that.
:13:02. > :13:07.Here at Holyrood, all the parties are claiming credit. I stress, all
:13:08. > :13:13.of the parties are cleaning credit for the Chancellor's U-turn,
:13:14. > :13:18.including the Tories. He was under pressure on this and she has
:13:19. > :13:20.responded but the SNP are particularly pleased because they
:13:21. > :13:24.were under pressure of a different sort from Labour who were offering
:13:25. > :13:29.to fill the gap, fill any gaps left by the cuts in tax credits, fill
:13:30. > :13:35.that in Scotland and they were demanding that the SNP do the same.
:13:36. > :13:41.John Swinney said let's wait to see what actually emerges from the
:13:42. > :13:47.Chancellor. What has emerged that is cutting tax credits has been
:13:48. > :13:53.stopped. I guess there will still be benefit cuts are particularly to
:13:54. > :13:56.housing benefit, but right now this is really made aprons and altered
:13:57. > :14:04.the dynamic of the political in Scotland. We have already alluded to
:14:05. > :14:11.this peculiar polarity in spending in Scotland. The OBR's bought has
:14:12. > :14:14.indicated figures but they can only be indicative because we don't
:14:15. > :14:17.really know what the UK Government's contribution to
:14:18. > :14:23.spending in Scotland will be because of the Scotland act. That is right.
:14:24. > :14:26.That is an act to give additional tax powers to Scotland. What I think
:14:27. > :14:35.the Scottish Government must say is that the figures which are announced
:14:36. > :14:39.today which is a 14% increase but a 5% in day-to-day spending up to
:14:40. > :14:46.2020. I am sure John Swinney will say that is a further pressure on
:14:47. > :14:51.his budget. The key point is what happens with regard to the fiscal
:14:52. > :14:54.framework. John Swinney will say, I am sure, that the figures the
:14:55. > :14:57.Chancellor sets out all the level that should be obtained, no matter
:14:58. > :15:01.how those sums are raised, because the debate that is going on between
:15:02. > :15:06.the Scottish permit and the Treasury is as to whether there should be
:15:07. > :15:10.further entrench and within the fiscal framework itself. I think
:15:11. > :15:16.today is the benchmark around which those talks will be based, but the
:15:17. > :15:20.Chancellor did say that we have the figures now, let's get on with a
:15:21. > :15:24.deal. He seemed very anxious indeed to cut a deal and I think on the
:15:25. > :15:25.fiscal framework that is a compromise.
:15:26. > :15:27.Let's get some further political reaction from Westminster's
:15:28. > :15:29.opposition parties now, and our correspondent David Porter
:15:30. > :15:32.is with the Shadow Scottish Secretary, Ian Murray.
:15:33. > :15:43.David. Thank you very much, Garden. I put that same question to Ian
:15:44. > :15:47.Murray. What does this do not for Scotland? I think the first thing
:15:48. > :15:51.that it does which we are very pleased about this is the U-turn on
:15:52. > :15:54.tax credits which Scottish people who are in receipt of tax credits
:15:55. > :15:58.will be incredibly pleased about. It is something the Labour Party has
:15:59. > :16:02.campaigned very hard on and a complete vindication of the House of
:16:03. > :16:05.Lords sending it back to the Chancellor. The devil is always in
:16:06. > :16:10.the detail in this Chancellor has an uncanny knack of creating a budget
:16:11. > :16:13.which unravels within days. Caravan tax, all those things have
:16:14. > :16:18.unravelled within days. We are very pleased about this reversal. Without
:16:19. > :16:22.getting into the debate, has he shot your fox? I don't think he has
:16:23. > :16:26.because we always said we wanted him to look at this. This is about
:16:27. > :16:30.working people so if the Government come forward with something which is
:16:31. > :16:34.a victory for working people then we will certainly support them on it.
:16:35. > :16:38.This U-turn has certainly achieved that we are pleased. Was it Labour
:16:39. > :16:42.wasn't actually the House of Lords should be thanking? We should be
:16:43. > :16:45.thanking the House of Lords of course because it was Labour Lords
:16:46. > :16:51.that brought this forward. We can do it in the House of Commons because
:16:52. > :16:54.the Government have a majority but the Lords deserve a great deal of
:16:55. > :16:58.credit for this U-turn. We need to see where this money is coming from,
:16:59. > :17:02.of course. That is the big danger but certainly on that policy we are
:17:03. > :17:06.pleased. Well done for fighting against the sirens there. He does
:17:07. > :17:10.seem to have found more money, whether it be from the back of the
:17:11. > :17:13.so far whenever to actually bring forward things that perhaps you
:17:14. > :17:16.thought it couldn't have been done. This Chancellor was supposed to have
:17:17. > :17:19.wiped out the deficit by the end of the last parliament. It is going to
:17:20. > :17:23.take until the end of this Parliament and every time he comes
:17:24. > :17:27.to that dispatch box he changes his we have to look at the detail of
:17:28. > :17:29.this. We are delighted by the capital expenditure that will come
:17:30. > :17:34.to Scotland and I hope we can focus that on housing prices and some of
:17:35. > :17:36.the big infrastructure problems that we have in Scotland but we will be
:17:37. > :17:40.looking book and those details but again this is ten years of
:17:41. > :17:42.posterity. This is not a good news budget. This is the Chancellor
:17:43. > :17:47.admitting he has been completely wrong although we back to 2010. You
:17:48. > :17:50.still try to fight the deficit. The other thing and then we should be
:17:51. > :17:54.looking at any budget is he mentioned the city deals and this is
:17:55. > :17:57.something I've been pushing on particularly hard. Inverness and
:17:58. > :18:02.Edinburgh and all city deals, we need to get those delivered. The
:18:03. > :18:05.Chancellor, as you mention, has put extra money into things like health
:18:06. > :18:08.in England and there will be knock-on effects for the Scottish
:18:09. > :18:13.Government. They are going to get more money. Is it now going to be a
:18:14. > :18:16.problem for the Scottish Government as they will be able to say to
:18:17. > :18:21.Westminster, you are not giving us anything. It shows you how important
:18:22. > :18:25.the Barnett formula is and we seem to be the only party that is going
:18:26. > :18:30.to defend the Barnett formula that does give Scotland consequential is
:18:31. > :18:34.when the protected departments like the education service in the NHS are
:18:35. > :18:38.protected, Scotland gets that Warwick consequential to invest in
:18:39. > :18:46.the Scottish Cup public services -- Barnett consequential. But the
:18:47. > :18:50.Scotland act also allows the Scottish Parliament to do what it so
:18:51. > :18:54.wishes under the Government of the day so there is a Barnett
:18:55. > :18:58.consequential but there is also the powers in the Scotland Bill are
:18:59. > :19:01.Scotland two tickets on path. And how important is it now that
:19:02. > :19:04.Scotland is getting these new powers that the UK Government and the
:19:05. > :19:07.Scottish permit very clearly come to an understanding of the way that the
:19:08. > :19:11.financing is going to be done and that everyone knows about it so it
:19:12. > :19:15.is transparent? The fiscal framework has to be transparent if that is
:19:16. > :19:18.something I have been calling for. The House of Lords called Britain
:19:19. > :19:21.last week in the Lords in the second reading of the Scotland Bill were
:19:22. > :19:38.calling for it yesterday. It have to be transparent and this is a huge
:19:39. > :19:42.gap to factor of 62. Without the Barnett formula it puts Scottish
:19:43. > :19:46.public services in jeopardy and we want to make sure the fiscal
:19:47. > :19:47.framework is transparent. I am very grateful for you joining us this
:19:48. > :20:10.afternoon. Back to you. The SNP were in some difficulty
:20:11. > :20:13.explaining how they were going to help people to not feel the effects
:20:14. > :20:16.of the tax credit cuts and Labour were challenging them to say that
:20:17. > :20:22.they would do it and now they can forget about it. It changes the
:20:23. > :20:25.dynamic, as Brian was saying earlier altogether because although the SNP
:20:26. > :20:29.were going to do something towards, I think they had tacitly admitted
:20:30. > :20:38.they didn't have the resources to make it all happen.
:20:39. > :20:44.So it has changed the dynamic completely. It is also taken a
:20:45. > :20:51.difficulty for the Chancellor off his back, because there are a lot of
:20:52. > :20:54.Conservative backbenchers who were unhappy about it as well, not just
:20:55. > :20:59.in Scotland but across the whole country. A lot of the others were
:21:00. > :21:04.unhappy about it, so it has taken it off his back. But I think the other
:21:05. > :21:09.problem in all of this is we had this great shower of mini
:21:10. > :21:15.announcements, ?5 million for the borough and all the other things, a
:21:16. > :21:19.great raft of things. I suspect anyone who has watched Osborne as
:21:20. > :21:22.Chancellor over the years since 2010, he's always talking about
:21:23. > :21:27.delivering on things like infrastructure. But if you look just
:21:28. > :21:32.the day before the statement was made, there was some news about
:21:33. > :21:38.previous infrastructure plan that dated back to 2012, where he was
:21:39. > :21:44.offering ?40 billion of backing for big infrastructure projects. It's
:21:45. > :21:48.got less than a year to run, that particular initiative. Of the ?40
:21:49. > :21:53.billion, only 3 and a bit billion has been committed to projects.
:21:54. > :22:01.There's a real problem, there's a lot of talk about high-speed rail
:22:02. > :22:05.and the rest of it, but having credible projects and, critically,
:22:06. > :22:08.having the workforce to deliver it, because so many people in the
:22:09. > :22:13.construction industry left the industry in the really bad years
:22:14. > :22:17.after the crash. A lot of young people are not training in those
:22:18. > :22:22.craft apprenticeships in these areas. Whether you've got the
:22:23. > :22:25.workforce to deliver this scale of infrastructure that's now going to
:22:26. > :22:30.come not just in England but in Scotland and Wales... Briefly coming
:22:31. > :22:35.back to something we were talking about earlier. He's found the extra
:22:36. > :22:39.money by saying interest rates and debt are low and tax receipts are
:22:40. > :22:43.going to go up. The economy is starting to grow. We are not in a
:22:44. > :22:48.crisis any more. Not only can George Osborne find this wriggle room this
:22:49. > :22:56.year but probably in every budget up until the next election. Absolutely.
:22:57. > :23:01.I think lease lifted the curtain on a strategy. This isn't just about
:23:02. > :23:07.him getting the economy right. This is about a quest to succeed the next
:23:08. > :23:11.Prime Minister, when he goes for the next election in 2020. He's
:23:12. > :23:18.indicated where he is going to go for a lot of his strict responses.
:23:19. > :23:22.There's always changes, but you can see now where he's going to, if we
:23:23. > :23:26.have a continued period of low interest rates and the rest of it,
:23:27. > :23:29.he's got wriggle room all over the place. Alf, we'll back with you
:23:30. > :23:31.later on. Back to Westminster
:23:32. > :23:32.and more political reaction. Let's rejoin our correspondent,
:23:33. > :23:44.David Porter. Thank you Gordon. I'm pleased to say
:23:45. > :23:48.I'm joined by Stewart Hosie? SNP's Treasury spokesman and deputy leader
:23:49. > :23:54.of the pear. A question I've been putting to the other politicians I
:23:55. > :23:59.will put to you. How shall we gave this for Scotland? We know there was
:24:00. > :24:03.a real terms cut to revenue spending and there's been a slight change in
:24:04. > :24:06.capital spending but overall this is a continuation of what we've saw
:24:07. > :24:09.over the last Parliament. More cuts, a continued squeeze, that's the
:24:10. > :24:13.bottom line. But he's listened to what people like you have been
:24:14. > :24:17.saying and he's going say in future I'm not going to cut the tax
:24:18. > :24:24.credits, I'm going to shelve that idea. I'm glad he has overturned,
:24:25. > :24:29.U-turned on his tax credit plans. But remember he always announced
:24:30. > :24:33.today he intends to maintain ?12 billion of welfare savings and he
:24:34. > :24:37.still intends to take ?42 billion a year out of the economy. More cuts
:24:38. > :24:42.than is necessary to run a balanced budget. He's going to have the find
:24:43. > :24:46.the money from somewhere. Looks likes he's done a humiliating U-turn
:24:47. > :24:51.on tax credits, which is to be welcomed, but he's going to take the
:24:52. > :24:55.money from many of the same people through housing benefit. As always
:24:56. > :24:58.with the Tories it is smoke and mirrors. But he will argue that the
:24:59. > :25:02.scoffs have a manifesto commitment to reduce welfare by this
:25:03. > :25:05.announcement. People voted for the Conservatives in the May election,
:25:06. > :25:10.so he has a mandate to go ahead with it. He will absolutely argue that.
:25:11. > :25:14.His party won 36% of the total electorate. Barely a third of the
:25:15. > :25:22.vote. They won next to nothing in Scotland. The worst result since
:25:23. > :25:25.1865. If he claims 36% or so of the total electorate is a mandate he's
:25:26. > :25:30.kidding himselfment nobody voted for a decade of austerity. As a
:25:31. > :25:35.philosophical point, you raise it in the House of Commons when you
:25:36. > :25:39.questioned him. By 2020 the level of economic activity, let's put it like
:25:40. > :25:45.that, that the state will have, will have gone down from
:25:46. > :26:08.Conservatives came into power in come down to the 35% he tried last
:26:09. > :26:14.year to 36 and a bit % he announced today, these are the spending levels
:26:15. > :26:18.we haven't routinely seen since the 1930s or 1940s. This is pure
:26:19. > :26:23.ideology and that's what's driving the cuts. But to some extent it
:26:24. > :26:27.won't affect Scotland so much, will it? You from next year will probably
:26:28. > :26:28.have more powers over income tax and raising money in Scotland.
:26:29. > :28:34.have more powers over income tax and them. And because I've been able to
:28:35. > :28:37.announce today an improvement in the public finances, the simplest thing
:28:38. > :28:46.to do is not to phase these changes in but to avoid them altogether. Tax
:28:47. > :28:51.credits are being phased out anyway as we introduce universal credit. I
:28:52. > :28:55.set a lower wherever cap in the Budget. The House should know that
:28:56. > :28:58.helping with the transition means that we will not be within that
:28:59. > :29:03.lower wherever cap in the first years, but the House should also
:29:04. > :29:08.know that thanks to our welfare reforms we meet the cap in the later
:29:09. > :29:13.part of this Parliament. Indeed, on the figures published today, we
:29:14. > :29:17.still achieved the ?12 billion per year of welfare savings we promised.
:29:18. > :29:22.We're joined now by the director of the Poverty Alliance, Peter Kelly.
:29:23. > :29:35.I presume this is great news for you? It is certainly good news. We
:29:36. > :29:38.attacked the Chancellor when the tax credits changes were announced, so
:29:39. > :29:43.therefore yeah, we are going to welcome when he completely reverses
:29:44. > :29:47.them. It is a bit of a surprise but it does suggest what's his strategy
:29:48. > :29:50.around welfare, what kind of welfare state does this Government want is
:29:51. > :29:55.this I'm not sure the Chancellor really knows. Let's get your
:29:56. > :29:59.reservations in a moment. But there is an interesting point there, Alf
:30:00. > :30:03.Young, because the impression George Osborne had given when he announced
:30:04. > :30:09.the tax credits was not that he was just going to make cuts in money,
:30:10. > :30:14.but was challenging the idea that Gordon Brown had, that in times of
:30:15. > :30:18.recession people automatically get subsidies in effect to keep working
:30:19. > :30:22.of the it may have had an effect on employment levels in the last
:30:23. > :30:27.session. Are we to take it that Gordon Brown now agrees with George
:30:28. > :30:31.Osborne? I'm not going to go that far. What he announced in the budget
:30:32. > :30:38.in July about progress towards a living wage and increasing the
:30:39. > :30:42.threshold before people pay income tax, he sees world where a lot of
:30:43. > :30:47.the people Peter was trying to defend in the fight against the tax,
:30:48. > :30:54.particularly the working family tax credits, is going to shift in
:30:55. > :30:59.Osborne's domain into better-paid work through this progression. And
:31:00. > :31:05.also in the housing changes in England, in terms of the building of
:31:06. > :31:10.starting homes and subsidised starter homes sold at a discount,
:31:11. > :31:14.really what he's going to be saying is why should people at the lower
:31:15. > :31:19.end of the income scale, people who are on what I hope to be more like a
:31:20. > :31:22.living wage, why should they not also aspire to own their own home
:31:23. > :31:27.rather than rent from the local authority or housing association?
:31:28. > :31:32.You said in your phrase, good not great. What are your reservations
:31:33. > :31:37.about this? Some of the changes announced in July are still
:31:38. > :31:39.happening, so the freeze on working age benefits, that's still
:31:40. > :31:45.happening. The loss of the family element in tax credits, as far as I
:31:46. > :31:49.understand, that's still going. The restriction on children to second
:31:50. > :31:51.and third child under tax credits, that's still there. That's
:31:52. > :31:57.legislation that was passed last week. So whilst the big changes, the
:31:58. > :32:01.tapers and the allowances, are not going to happen, there's still some
:32:02. > :32:07.fundamental changes. As he said, we are still going to lose ?12 billion
:32:08. > :32:13.a year out of our welfare spending. Do you think that ?12 billion will
:32:14. > :32:18.come from indexing or not indexing things rather than actual cuts? It
:32:19. > :32:21.is a cut to those whose income isn't staying up. But that's where some of
:32:22. > :32:28.the biggest cuts have been made since 200. That's why we have 50% of
:32:29. > :32:33.people who are living in poverty in Scotland, living in so-called severe
:32:34. > :32:38.poverty. That's a big increase on ten years ago. Those changes, not
:32:39. > :32:42.quite sleight of hand, we all know they are being made, but they are
:32:43. > :32:49.not the big tax credit changes that were announced. But that's taking a
:32:50. > :32:57.lot from people who aren't working. He now seems to have given up, the
:32:58. > :33:02.criticism of the system, that it is subsidised by employers, to keep
:33:03. > :33:06.people on rather than letting them go, that philosophical argument
:33:07. > :33:09.seems to have gone away? That part of the argument perhaps has gone
:33:10. > :33:13.away. The desire to have a smaller welfare state, and particularly to
:33:14. > :33:18.have a punitive approach to those who aren't in work. That remains.
:33:19. > :33:21.That's completely unchanged from what we heard today. Thank you Peter
:33:22. > :33:23.Kelly for that. Now to the Chancellor's
:33:24. > :33:25.announcement on public finances. It seems they're ?27 billion
:33:26. > :33:31.better off than they were in July. Well joining me now with
:33:32. > :33:33.their view on this, is Deputy Director of the Institute
:33:34. > :33:44.for Fiscal Studies, Carl Emmerson. This seems to be almost a magic
:33:45. > :33:49.trick, this sudden pierce of ?27 billion. Is it just jiggery-pokery
:33:50. > :33:54.with the numbers or is there something substantial behind it? It
:33:55. > :33:57.is important to remember that the ?27 billion underlying improvement
:33:58. > :34:01.is over several years, it is not per year, and therefore it is not a big
:34:02. > :34:04.change when Governments are collecting and spending billions of
:34:05. > :34:11.pounds, you can get these kind of changes. What the example is doing
:34:12. > :34:21.with this is interesting. He's banked part of it, but the rest is
:34:22. > :34:25.used on the reversing the tax changes. Robert Peston said he
:34:26. > :34:28.reckons that overall managed spend ing will be flat over the period of
:34:29. > :34:32.this Spending Review. Have you come to the same conclusion? The overall
:34:33. > :34:36.cut to spending isn't that deep. What's deep is the cut to the
:34:37. > :34:42.unprotected departments. Not as deep as we might have thought before
:34:43. > :34:48.today, but still deep cuts in terms of day-to-day spending on areas such
:34:49. > :34:54.as justice, business and transport. Transport in particular, while it's
:34:55. > :34:59.capital spending is rising its day-to-day spending has been cut
:35:00. > :35:02.over the next fewer years. These big cuts to individual departments are
:35:03. > :35:08.because other departmental spending is protected. But if overall it is
:35:09. > :35:15.flat in real terms, can we say that the age of austerity for now is
:35:16. > :35:19.over? There isn't any cuts happening to large part of the public sector,
:35:20. > :35:25.no austerity in terms of the NHS, schools, at least in England. None
:35:26. > :35:31.for the Defense Department, overseas aid, and none for pensioner benefit,
:35:32. > :35:34.that's true. But there'll be cuts over justice, transport, where the
:35:35. > :35:41.cuts will be very deep over the next four years. That's on top of the
:35:42. > :35:46.cuts we've already had. Carl, sorry to hit you with this question, but
:35:47. > :35:52.we've been puzzling about what the indicative figures for the Scottish
:35:53. > :35:58.budget. The new tax powers coming to Scotland, presumably these are
:35:59. > :36:04.indicative figures. The Government can't say what its grant would be to
:36:05. > :36:11.Scotland base doesn't know. Clearly we can know under the status quo,
:36:12. > :36:15.whereas the Government would get money under Barnet for schools and
:36:16. > :36:22.hospitals, but Scotland can choose to allocate money differently fit
:36:23. > :36:27.wishes. On the welfare, the cuts to tax credits are going, but there's
:36:28. > :36:30.still going to be ?12 billion taken from the welfare budget. Where is
:36:31. > :36:35.that coming from? People are saying it is going to come from the way in
:36:36. > :36:40.which the index benefits are against inflation, is that right? Most
:36:41. > :36:45.working age benefits are going to be frozen in cash terms over the next
:36:46. > :36:49.four years. That's announced back in July. There's going to be
:36:50. > :36:53.restriction on the amount of benefit you can receive if you have what's
:36:54. > :36:59.deemed as a large number of children in your family. While the Chancellor
:37:00. > :37:03.reversed tax credits, he didn't reverse universal credit, so while
:37:04. > :37:08.existing claimants of tax credits will see in cash terms they won't
:37:09. > :37:10.experience any cut, people moving on to these benefits in future,
:37:11. > :37:14.particularly universal credit, they will get less than what they would
:37:15. > :37:18.have got had the Chancellor not made the announcement back in July.
:37:19. > :37:22.There's still ?12 billion of welfare cuts the Chancellor is getting there
:37:23. > :37:27.in the end. Do you think we'll see more of this over the next few
:37:28. > :37:32.years? We are not in a crisis any more. The economy is growing, not
:37:33. > :37:36.shrinking. When an economy is growing, as we saw under Gordon
:37:37. > :37:48.Brown's Chancellorship, the Chancellor can always come up with
:37:49. > :37:52.unexpected ways to make changes. Some pleasant, positive news over
:37:53. > :37:57.the next few years will be welcome. Does the Chancellor, if that
:37:58. > :38:01.happens, does he use it to bank it, which would be perhaps what he
:38:02. > :38:06.should do, given how large the deficit is? Or will he use the money
:38:07. > :38:16.he was surprised with and hand it snout Thank you.
:38:17. > :38:23.He said the so-called vow promising more powers for Scotland had been
:38:24. > :38:27.delivered. It must be underpinned by a fiscal framework that's fair to
:38:28. > :38:31.all taxpayers and we are ready now to reach and agreement. The wall is
:38:32. > :38:37.in the court of the Scottish Government. Let's have a deal that's
:38:38. > :38:41.fair to Scotland, fair to the UK and that's built to last. We are
:38:42. > :38:44.implementing the city deal for Glasgow and negotiating deals with
:38:45. > :38:48.Aberdeen and Inverness too. Of course, if Scotland had voted for
:38:49. > :38:53.independence, they would have had their own Spending Review this
:38:54. > :39:00.autumn and with world oil prices falling and revenues from the North
:39:01. > :39:07.Sea cast by the OB Dr Be down 94%, we would have seen catastrophic cuts
:39:08. > :39:11.in Scottish public services. But thankfully Scotland remains a strong
:39:12. > :39:18.part of a stronger United Kingdom. CHEERING.
:39:19. > :39:29.So the Scottish bloc grant will be over ?30 billion in 2019-20, while
:39:30. > :39:32.capital spend ing will rise by 1.9 billion through to 2021. UK
:39:33. > :39:37.Government giving Scotland the resources to invest in it its
:39:38. > :39:48.long-term future. When you look at the OBR figures for
:39:49. > :39:56.oil they are quite alarming. I think they are forecasting that oil
:39:57. > :40:02.revenues will be ?100 million annum for four or five years? Tiny and
:40:03. > :40:06.with the pool. Fields being decommissioned, the longer term
:40:07. > :40:12.picture probably looks even worse in some ways. I think I'm right in
:40:13. > :40:17.saying that the petroleum revenue tax figures are negative. In other
:40:18. > :40:21.words more money given in subsidy to the oil companies in tax breaks to
:40:22. > :40:26.clean up exploration than in revenue from them. That's a pressure and I
:40:27. > :40:31.think there'll be another pressure on the SNP, if money is coming
:40:32. > :40:34.through on protected service it is like health, an extra ?12 billion
:40:35. > :40:39.over the life of the Parliament, ?6 billion up front. There's been an
:40:40. > :40:42.argument in the past about whether all the consequentials from health
:40:43. > :40:48.have been spent on health in Scotland or used by the SNP to do
:40:49. > :40:51.other things. If that were to continue, I think there would be
:40:52. > :40:56.pressure, particularly if there were the kind of problems we've seen at
:40:57. > :41:01.the new hospital in Glasgow and in other areas of health provision in
:41:02. > :41:06.Scotland. So there are some pressures in this for the Scottish
:41:07. > :41:11.Government I think going forward. I just wonder, on oil, whether what we
:41:12. > :41:15.are seeing, and please disagree with me if I'm wrong, is two things
:41:16. > :41:21.coming together simultaneous, the fall in oil price, which would
:41:22. > :41:25.always have a short term effect on revenues, but the coming to the end
:41:26. > :41:29.of the North Sea oil. I wonder if we are in a situation where even if oil
:41:30. > :41:33.price went back up for the foreseeable future, because the
:41:34. > :41:38.costs of exploration and production get higher and higher you need more
:41:39. > :41:45.subsidies for it, oil revenues never really come back? Absolutely. The
:41:46. > :41:50.reason oil prices have fallen as high as it is is chronic
:41:51. > :42:06.overproduction. The north sits in the sea of our sources of bon
:42:07. > :42:13.feels... Saudi continues to pump like mad to try and stop fracking in
:42:14. > :42:18.America. On a more general point, where is the vision? The two main
:42:19. > :42:23.things, I'm knoll going to do what I said on tax credits and I'm not
:42:24. > :42:29.going to do what you thought I was going to do on the police? He has a
:42:30. > :42:34.catalogue of visionary language. Today it was return of the builders.
:42:35. > :42:39.But when you try toage ides what they are actually delivering down
:42:40. > :42:42.the years there's a lot less delivery than flowery language in
:42:43. > :42:46.the beginning. We'll be back with you in a moment.
:42:47. > :42:49.This time last year the Lib Dems were in government -
:42:50. > :42:51.now they're firmly back on the opposition benches.
:42:52. > :42:56.Let's get some reaction from them now with David Porter.
:42:57. > :43:01.I'm joined by Lord Jeremy Purvis from the Liberal Democrats. What did
:43:02. > :43:06.you make of what George Osborne did today? It was a mixed bag. There are
:43:07. > :43:11.some areas I think were the wrong direction. But my vote as a Liberal
:43:12. > :43:16.Democrat member of this Parliament worked against the tax credit cut
:43:17. > :43:20.and the U-turn is a direct result of the vote I cast in yes the unelected
:43:21. > :43:23.chamber but yes the chamber of the House of Lords which forced the
:43:24. > :43:30.Government to think again. You think of all of the 55 or 54 SNP MPs that
:43:31. > :43:33.there are, their votes were relevant on these issues. The Liberal
:43:34. > :43:36.Democrats forced the hand of the Government and that means that
:43:37. > :43:40.people across Scotland are going to be better off as a result. So this
:43:41. > :43:43.is the new democracy, the new politics, the unelected House of
:43:44. > :43:48.Lords don't like something, they defeat the UK and the UK Government
:43:49. > :43:52.changes its mind? The constitution is something I want to change, I
:43:53. > :43:56.think everybody knows that. As long as we have this system a Liberal
:43:57. > :44:01.Democrat in Parliament will vote for people on low and Northern Ireland
:44:02. > :44:06.income tax. This U-turn is a result of the Liberal Democrats vote and I
:44:07. > :44:12.am proud to have played a part in that. Crudely putting a kilt on the
:44:13. > :44:19.Spending Review, what's in it for Scotland? I think that in many
:44:20. > :44:23.respects the choices are over to the Scottish Parliament, because the
:44:24. > :44:27.reductions are in many respects less than what was anticipated, feared. I
:44:28. > :44:31.think in some areas though the problems when it comes to the
:44:32. > :44:37.further tax powers the Scottish Parliament are going to be having,
:44:38. > :44:41.MSPs are going to have some serious choices to make. That's to the good.
:44:42. > :44:45.We have to recognise that if we are going to be reversing the trend
:44:46. > :44:50.under the SNP of cutting health expenditure, lower income tax for
:44:51. > :44:54.education, we need some very serious policy choices and the SNP do need
:44:55. > :44:59.to change course. One of the things we've seen south of the border with
:45:00. > :45:03.perhaps changing on council tax freeze, does the Scottish Government
:45:04. > :45:06.continue the tax cut for the people in the biggest house in this
:45:07. > :45:10.Scotland, or do they realise that the system should be fair. I think
:45:11. > :45:13.the Government in Scotland should be change its course. But the Scottish
:45:14. > :45:18.Government will be getting more money as a result of the so-called
:45:19. > :45:21.Barnet consequentials. Health in England will get more, therefore
:45:22. > :45:28.Scotland will get more. It doesn't have to spend it on health but it
:45:29. > :45:35.will be getting more money. I hope and my party hopes that the trend on
:45:36. > :45:38.the SNP government to reduce expenditure, a 0.7% cut in health
:45:39. > :45:43.expenditure in real terms under the SNP, we want that to be reversed. We
:45:44. > :45:50.cannot afford for our NHS in Scotland to be starved of funding
:45:51. > :45:54.under the SNP, so I want a change of direction. The Liberal Democrats
:45:55. > :46:01.will be doing as much pressure as they can on the Scottish Government,
:46:02. > :46:05.perhaps similar to what I and my colleagues do for George Osborne,
:46:06. > :46:14.and get money back back into health in Scotland. Some of the figures,
:46:15. > :46:17.from what you have deduced, rev flews in devolved Scotland are
:46:18. > :46:25.perhaps not going to be as much as some people had thought. One of the
:46:26. > :46:29.technical papers today, the OBR report, forecast of the devolved
:46:30. > :46:34.revenue, we are moving into a new generation in Scotland in politics
:46:35. > :46:36.where there's going a be a much bigger tax basket the responsibility
:46:37. > :46:42.of the Scottish Government. Therefore it is going to be tougher
:46:43. > :46:48.to secure greater revenue unless we grow the economy, to grow the tax
:46:49. > :46:52.base, which is making people more prosperous, and turn around public
:46:53. > :46:57.services is. The OBR warning is clear. The Scottish Government needs
:46:58. > :47:03.to take this seriously, as they are taxpayers in Scotland as well as
:47:04. > :47:07.users of the services. We'll be making sure we've got the right
:47:08. > :47:11.balance going forward. That's probably a conversation for another
:47:12. > :47:18.day. Thank you. Gordon, it may look sunny here. It is just about to
:47:19. > :47:22.start bucketing down with rain. I'm going indoors.
:47:23. > :47:35.Let us talk about what happens now? George Osborne could find himself
:47:36. > :47:41.with more wriggle room. Does the debate in Scotland move on to OK you
:47:42. > :47:45.are getting all these powers, what are your taxes going to be? That's
:47:46. > :47:53.clear from what George Osborne said and the Prime Minister before him.
:47:54. > :48:05.He had a go at one of the female MPs from the SNP on the topic of it is
:48:06. > :48:10.up to you now, the ball's in your court. So they have some challenges
:48:11. > :48:16.there. I think they will struggle to pin the austerity label, which was a
:48:17. > :48:23.convenient political attack like, on Osborne, since he's done the U-turn
:48:24. > :48:27.on the working family tax credit cuts he previously proposed. It is a
:48:28. > :48:34.problem for Labour in Scotland as well isn't it? Their great wheeze is
:48:35. > :48:38.this idea we'll demand of the Scottish Government, ameliorate the
:48:39. > :48:43.tax credits cuts in full, and that's gone out of the window. The
:48:44. > :48:53.leadership in Scotland has had to rethink. Essentially it was the big
:48:54. > :48:59.idea since Cassia dug gale assumed the leadership, about how much she
:49:00. > :49:04.would do on that front. It is classic George Osborne, in that he's
:49:05. > :49:08.put both the governing party... It was described, Stewart Hosie
:49:09. > :49:14.described it as a humiliating U turn. It was a U-turn. Or is it a
:49:15. > :49:19.traffic wheeze? I thought George Osborne's expression thought he
:49:20. > :49:24.thought it was a terrific wheeze. I would call it a U-turn with
:49:25. > :49:29.politically strategic potential. In what sense? He's forcing them to
:49:30. > :49:36.find new ground to fight him on. And is producing money they now have to
:49:37. > :49:39.do something with. The other Scottish battle, the essential one,
:49:40. > :49:43.is this fiscal framework. The thing that's been a thread throughout the
:49:44. > :49:47.conversations we've had is how they are going to, with the changes from
:49:48. > :49:50.the Scotland Bill, how they make that work. To be revolved. Alf
:49:51. > :49:52.Young, thank you. That's all we have time
:49:53. > :49:54.for this afternoon. I'm back with Sunday Politics
:49:55. > :49:56.Scotland on Sunday morning. You were so nervous,
:49:57. > :50:45.and you've just excelled yourself. This is a good sign, by the way,
:50:46. > :50:52.when he reacts like this.