real concern that, 0k, known circles real concern that, 0k, known one is demanding right now that this is payback, known no one is demanding right now that people are asking for tax rises are further cuts for the rest of it, but before too long, there are tories who are really itchy to hear how the government plans to consolidate, how the government really plans to put rocket boosters up the private sector to actually grow our way out of it rather than the government looking to balance taxes in its own spending. and there was relatively little from rishi sunak about the sort of zeal and opportunity in the private sector. there was an interesting, slightly thatcher —ish pa rt interesting, slightly thatcher —ish part where he was talking about community and family and business, but one senior tory mp said to me, i wa nt but one senior tory mp said to me, i want to hear how he's going to recreate the animal spirit of the economy, how is going to unleash the power of the entrepreneur to make a difference. there are two the uncertainties on these figures. one is the vaccine, of course. and of course that's going better than

eve ryo ne course that's going better than everyone expects, fantastic, may be more of the economy will come back on stream from the deep freeze than expected. the other is brexit. these are seen, i think, a deal. in the absence of a deal, the obr says there will be a long—term impact on productivity, the amount of money you would get from tariffs on our trade with the european union, taxes on trade, that would be outweighed by problems in how smooth it is to trade with europe. 50, against this backdrop that we have put out there, uncertainty on the upside and the downside into significant —— in two significant areas. let's talk to pauljohnson, joining us from the institute for fiscal studies, we've been talking about the headline figures that we discussed earlier, but what's your reaction to the £394 billion of borrowing that only goes down to 100 billion by 20 4—25, and

the contraction of the economy by 11.3%? these are the contraction of the economy by 11.396? these are all, as we expected, completely staggering numbers. i think it is worth saying that quite a lot of other stuff hidden within this, the chancellor sounded very generous in what he was saying, and in terms of the huge amounts he is putting towards the covid related needs this year and next, he is being very generous, more than 50 billion next year, as well. but not so generous if you look at everything else, the office for budget responsibility have broken down these numbers according to covid spending and non—covid spending and we actually see quite big cuts in public spending over the next few years, relative to what was being planned back in march, so even the borrowing numbers you'vejust quoted assume we will be spending less in three or four years time than was planned back in march, that

we spend nothing after next year on anything related to covid, and that overall, the pressures on public spending have been reduced by what we see this year, i think that is unlikely, to put it mildly, sol think there are some questions here about how well this set of numbers will work into the given what we know about pressures on public spending. we've also been talking about growth figures at the chancellor unveiled today for the next three or four years. what did you make of the measures he announced in terms of trying to tackle unemployment and create jobs? will those measures help significantly? create jobs. will those measures help significantly? to some extent, clearly, more money for training and drop support and infrastructure are the classic sorts of things that governments can do in the sorts of

circumstances and the government frankly did not do too bad a job, particularly in the last couple of years, the last labour administration supporting the economy at that point and it is something that countries did around the world. this is on a very large scale this time round because of the scale this time round because of the scale of the recession, but it's not going to protect everyone by any means. we are still looking at unemployment of over 7%, and for those of us who remember the 1980s, doesn't sound too bad, but for those of us who have lived through the la st of us who have lived through the last decade sounds and is pretty terrible. these are the sorts of things governments do and they are by no means perfect. the key always lies in the delivery of them, as the chancellor pointed out. announcing the numbers is easy, but delivering them is in. very briefly and then i'll other guest —— our other guest might want to ask you something.

about the 11.3% contraction in the economy this year, we are hearing it is the second sharpest in europe. does that sound about right to you? we knew that the contraction through to the summer was the second sharpest in europe and only spain had done worse and this was most developed. that is true over the year as a whole. that partly reflects the length of the lockdown and partly reflects the structure of the economy were retail services and so on were a the economy were retail services and so on were a bigger fraction of the total. and of course, we had more headwinds from brexit than other countries as well. laura, in terms of the lockdown restrictions, so not a lockdown as such, but the restrictions continuing until next march, can we pretty well right off any growth for the rest of this year and the beginning of next? there won't be any chance then for the

recovery to start. it is likely to be patchy, so tomorrow we will get the announcement from the governance of which parts of england are going to go into which part of the tiered syste m to go into which part of the tiered system and the expectation is that the vast majority of the country will be on the top two tiers. it's possible that none of the country will be in the areas where there are most freedoms, so all the way through until march we will be in this holding pattern where there will be periods businesses can get going again in some parts of the country and periods when it's very difficult. this is one thing that makes the speed of the recovery hard to predict, but it certainly means that until we get to that point, to the spring, and until we can be clear if the vaccine and mass testing programmes will be sustainable and roll out in the way the government hopes to, it's very, very ha rd the government hopes to, it's very, very hard to know specifically which one of these figures from the obr to date will look like they were a clear crystal ball in six months' time, and which are going to look like they were completely wrong. pauljohnson, thank you very much for talking to us again after the

statement. we can now talk to steve barclay, chief secretary for the treasury, who was sitting in the house of commons, two metres away of course, from rishi sunak, the chancellor. welcome to the programme. how does it feel to be a conservative treasury minister borrowing £394 billion this year, nearly a fifth of the entire economy? it points to the unprecedented nature of this global pandemic we are facing, but i take comfort from what the imf have said, that these measures have presented worse economic scarring and have helped reduce the impact on people's incomes they have saved jobs, and we referred the there were fewer insolvencies this year than last, and you are right, these are huge numbers in terms of what the uk government is borrowing, the consequence of inaction would be far greater, and we are able to do this

because of the difficult decisions taken because of the difficult decisions ta ken over because of the difficult decisions taken over the last decade by previous treasury ministers including george osborne and philip hammond, and because of their decisions to get the deficit down we are then in a position to respond in the comprehensive way we have. and ina way the comprehensive way we have. and in a way recognised. you say measures taken by previous governments have some way alleviated even more governments have some way alleviated even more pain in terms of the uk economy, but why is it that the economy is shrinking or contracting by 11.3% which is the second sharpest in europe, and it was the ha rd est sharpest in europe, and it was the hardest hit by major economies from april tojune hardest hit by major economies from april to june according to hardest hit by major economies from april tojune according to the oecd. we know we have a services economy, a consumer led economy, which was why in the package of measures that the chancellor set out in the summer that things like eat out to help out was getting consumer confidence back and we actually saw the economy bounce back during that period. the reality has been that the pathway of

the virus has changed and we have had to go into a second national lockdown, but we can see light at the end of the tunnel. vaccine development. not quite yet. the vaccine development. not quite yet. the vaccine programme development. not quite yet. the vaccine programme in the £6 billion we have invested in the portfolio vaccines, we can see light at the end of the tunnel, but of course we need to reduce the economic scarring between now and then. but you are going to put vast swathes of the country into tough regional restrictions and we will find out what they are tomorrow, but we know they are going to be tough because they are going to be tough because the prime minister has said so and they are going to last right through to the spring. how much damage will that do economically in your mind? the last quarter of this financial year will be a write—off, won't it? the reasons we are taking the measures on extending furlough and the business support on help with cash the business support on help with ca s h flow the business support on help with cash flow is again to egg retain the crucial link between the workforce and the business sector, and the international verdict on that has been that this has lessened the

economic scarring that we would otherwise have faced, and you are absolutely right to say that this comes at a huge cost. we recognise that, and the obr is right to point that, and the obr is right to point that out, but the cost of inaction would be far greater and it is through schemes like furlough, the self—employed and succumb support scheme, that we are able to act, and that's across the whole of the uk —— self—employed income support scheme. this is a review about the union of the united kingdom, levelling up across the uk, but also strengthening that union, and it is through the measures the chancellor has announced that we are able to operate in a uk wide way, and i think that is one of the strengths of the treasury's response to the covid pandemic. here in the studio we have laura kuenssberg, and faisal islam, and pfizer wants to put a question too. do you still feel you could claim there was no return to austerity when you have a public sector pay freeze affecting just under half of public sector workers,

you have had to renege on your ma nifesto you have had to renege on your manifesto commitment on foreign aid. that idea that austerity is finished, to some degree and for some people who feel it, it is back. i would, because some people who feel it, it is back. iwould, because if some people who feel it, it is back. i would, because if you look at core spending, the sort of line i would expect a look at, 3.7% increase in co re expect a look at, 3.7% increase in core spending and if you look at the 100 billion we are investing in infrastructure, 58 billion in transport, high speed two, cp six on the rail and road schemes and if you look at the 14.6 billion into research and develop and which is about the future direction, what sort of country we want to be, you can see huge investment and that is on top of the 6.6 billion of cash investment in the nhs, an additional 3 billion on top of that. the french and germans are putting much bigger amounts than that, much bigger fiscal stimulus to get the economy up fiscal stimulus to get the economy up and running again in the next 12 months. we've chosen not to do that.

the public finances are typical, obviously, but we have chosen not to follow the french and germans on a big fiscal stimulus. you can see whether it is on health, where the co re whether it is on health, where the core spending has increased significantly, whether on education, and the announcement in 5.1 billion in further education, and the 2 billion schools increase, but also on skills. the prime minister's lifetime guarantee in terms of skills. so you can see across skills, support for those unemployed and we recognise there will be a spike in unemployment which is why the department for work and pensions, through the restart scheme, £2.9 billion of further investment, building on the plan for jobs and the investment that has gonein jobs and the investment that has gone in with the doubling of work coaches, so you can see a comprehensive package of investment, getting the infrastructure net zero with the green jobs, getting the infrastructure net zero with the greenjobs, and i know you've spoken about that in the past and the prime minister gave a speech on that last week. you can see across the board investment in

infrastructure in our research base, in net zero and greenjobs, but above all doing something that has been levelled up across the uk and again that is why the chancellor set out a £4 billion levelling up fund, which is crucial to ensuring that many of the places left behind in the past are able to tap into the schemes which they often felt they we re schemes which they often felt they were excluded from. so a £4 billion levelling up directed at places that in the past i felt forgotten.|j levelling up directed at places that in the past i felt forgotten. i know you would have been across the detail of all of this, and it is the case that day to day normal public spending will be less next year than what was promised in march, but on a slightly different issue that i know many viewers and a lot of your backbenchers will want to know, is it good enough, even in these historical situations to set out all of this without giving people the merest hint of how and when it will

be paid for. you are referring to the forecasting, and i would say this is a one year spending review and we have brought forward a huge investment that the chancellor set out in terms of covid spending and the additional spending on top, so you need to bear that in mind when looking at that in addition to the co re looking at that in addition to the core spending i mentioned in response. but you don't deny that day—to—day spending will be less thanit day—to—day spending will be less than it was forecast to be in march? that's an important point. still a lot of pressure on government departments. of course, spending is increasing by 3.7%, but in terms of the wider point, of course, once we are through the storm that the pandemic causes, that will be the time to deal with the medium term fiscal sustainability. we are able to take these measures because for the proceeded decade we got the deficit down where we inherited under labour, around 10% down, to below 2%, so that's why we are able to do that but of course we are still dealing with the uncertainty from the pandemic and in fact the 0b recognised that in bringing forward

the range of forecast that they had, so we need to make sure we get the vaccine deployed, ensure we can lift the restrictions applied to so many of the viewers watching this whose businesses are currently restricted and get the economy bouncing back as quickly as possible. schemes such as the furlough enable the bounce back to happen more sharply than would have been the case. cani can i bring to your attention something that was announced, but it has vexed many conservatives. boris johnson always pledged the 0.7% commitment to overseas aid would be enshrined in law and it was a ma nifesto enshrined in law and it was a manifesto commitment. but today you have announced it will be cut to 0.5%. the archbishop of canterbury has said it is shameful and wrong. what do you say? i disagree. firstly, we will be spending £10 million next year on overseas aid at the same time as having

unprecedented levels of public borrowing. secondly, we will be spending the second highest of any of the g7. if you take the period when labour were in office between 97 and 2000 and the average 3.9%. we will be averaging 0.5. if you look at other countries, the average is 0.38%. you have got to look at the soft power in parallel with the hard power. our troops are involved in peacekeeping or in response to natural disasters, they also play a humanitarian role. if you let me finish, next year we will be spending 56 billion if you combine both of those, between hard power and soft power, so you have to look at this in the round. and you have said that, you have to look at in their own, but the archbishop of canterbury has said it is made worse by no set date for restoration.

that is pretty damning. we are spending £10 million, which your viewers will see as a very large sum, given the wider fiscal situation. it is in the widest contest of the third—largest diplomatic network, and our defence is playing a role around the world and keeping people safe. what i would say to the archbishop is we have unprecedented levels of borrowing. we do want to return to 0.7 when the fiscal time allows us to do so. when will that be? that could be never. we have said that is what we want to return to. but we have to recognise, you started the piece with this, £394 billion of borrowing. a question for the archbishop is, is he saying the government should ignore that level of borrowing or treat aid in isolation of the wider spent

overseas? also ignore the fact that we will still be spending significantly more compared to other countries. we are spending more than france, italy and canada. we are spending more than those countries and perhaps the archbishop might wa nt to and perhaps the archbishop might want to look at the spending of those countries before picking up on the spending of the uk. it is very clear, we will invite him on to discuss it. thank you very much, we will be talking to labour's bridget philipson shortly. briefly, both of you, there will be a political row about this. it is conservatives themselves who are upset about it. it is and it was one of the things david cameron introduced and it was a conservative party policy. we have heard from former prime ministers on this and i wonder if we will hear from them by the end of the day. that said, there has been resistance to this. this plays both ways on the tory backbenches and amongst our viewers. there is a point about

this, at a moment when we are about to leave the departure lounge of the eu, it is very clear that prime minister wants to invest in britain's image around the world. global britain, soft and hard powers, stephen barclay describes it. you wonder in that context if the uk would be happy and being second in an area where we were at the top of the list. it will be interesting to see how much pushback there will be on the tory backbenchers on this. i suspect there might be quite a lot of ructions, but it will be very popular with others. people are split down the middle on this issue. on the issue of brexit, we heard recently from andrew bailey, the bank of england governor, who said no deal would have a more damaging ora no deal would have a more damaging or a longer lasting effect than covid. what do you think? let me ta ke covid. what do you think? let me take the second part first. within the obr numbers, i am leafing through the numbers, they have not printed any books, we have to do it

on our tablets, the growth figure in this, the final quarter, which has not finished yet, is —2.7%. that is a dip. for it to be a recession it has to be another dip, but it is expected to go up. lockdown sceptics in parliament will say, there we go, we we re in parliament will say, there we go, we were growing back and the obr is saying we are going down again. in terms of going forward, and impact and no deal would be a further hit the economy. it is also worth noting the economy. it is also worth noting the the prime minister is going for and within their grasp is quite thin in terms of the connections with europe. it will raise trade barriers that currently do not exist in certain industries. what is interesting is the obr have printed a summary of virus scenarios and an upside includes lockdown ending on december the 2nd, effective test,

trace and isolate and vaccine widely available from the spring, and it says it will only have 10% hit and debt will only in 90%. on the downside, ineffective track and trace and ineffective acting, it will be up to 103% on our national income. so some uncertainty. will be up to 103% on our national income. 50 some uncertainty. a stock to the shadow chief secretary to the treasury, bridget philipson from the labour party. hello. before we get to the statement, i want to ask you about the wurk coming up on going back to a system of regional coronavirus restrictions in england. we you support the government or not? of course we will, we have done what is in the national interest throughout this crisis. had we implemented the circuit breaker that keir starmer had called for, we could have avoided a longer, deeper

lockdown. there is a word of caution in that the tier system has not worked as it is meant to have. we also want to see financial support running alongside public health measures. we have not heard anything yet. let's avoid the chaos and the madness we saw last time that caused such great problems and is leading to real business uncertainty. they cannot rely on your unconditional support as keir starmer said he would do with the labour party in terms of supporting the government on their covid policies. the government needs to continue to do what is in the national interest. what does that mean? we will want to look carefully at the detail and we will want to make sure the government brings forward economic support hand in hand with public health measures. we have not had that. it is more difficult to get on top of the virus and our economy has taken a real hit. i have heard from businesses in my area and in the north—east. we have faced additional restrictions for a lot longer and it

is so hard for businesses to plan, workers have been laid off, that could have been avoided. we need that strategy to come together. the public health and the economic response working together. we have had quite a lot of discussion about the big, sobering figures, whether it is on the contraction of the economy or the amount of borrowing. we talk to pauljohnson from the institute for fiscal studies and he said he thought the government had been generous when it came to the amount of money being spent on public services to cover it covid, something in the region of £55 billion. do you agree? we think it necessary when the government tells people to stay—at—home and forces businesses to close that they have to provide a response to that. the irresponsible choices the chancellor has made in recent months has meant we have taken the biggest hit as an economy in the g7 alongside the worst excess death rate. we have seen both of that. today was the opportunity for the chancellor to set our country back on the course of recovery and to see growth return

once more. what i am also concerned about is looking at some of the detail of this. it appears there is a£1 detail of this. it appears there is a £1 billion council tax bombshell lurking in these documents. that is the kind of trick george osborne used to pull and we will be looking carefully at exactly what is in these announcements. on infrastructure we have had a decade where we have been big on rhetoric and short on delivery. this announcement around this infrastructure fund has all the hallmarks of the talent fund that was heavily criticised for the way it was administered. thank you very much. we will be speaking to sir ed daveyin much. we will be speaking to sir ed davey in a moment. your reaction, laura. it's interesting that at the beginning they wanted to keep their options open about the vote. the announcement is welcome to about the different patchwork. she was being a bit noncommittal. it is hard for mps on all sides to give a firm commitment until they see their own

areas. there are frantic telephone calls and conversations going on around westminster with mps talking to health ministers and other people about exactly what will be happening to theirarea. about exactly what will be happening to their area. tomorrow might end up being just as difficult a day for the government as today is what the prime minister sets out the regional tears. labour was giving a critic about the government was much confidence and not doing enough, but it is still not really a stage in terms of the economy where there is a crashing, ideological bunfight about whether or not the treasury has been doing the right thing. let's talk to ed davey. what did you make of the statement? liberal democrats had called for investment so we could have a greener, fairer economy, so nobody would be left behind and above also it would protect and create jobs. behind and above also it would protect and createjobs. what behind and above also it would protect and create jobs. what we heard in the statement was nothing of the like. we unfortunately have had from the independent forecasters that unemployment is likely to go up

1 million over the next six months. that is a tsunami ofjob losses. the chancellor's plan just did that is a tsunami ofjob losses. the chancellor's planjust did not a nswer chancellor's planjust did not answer that. liberal democrats are really worried that the green economic recovery really worried that the green economic recovery that we need will not happen because of this plan. you have also focused a lot on social ca re have also focused a lot on social care and the chancellor said that the sector will get up to an extra £1 billion. you welcome that i presume? is nowhere near enough. what would you like to see? billion. if you look at what people have been calling for because the sector has been so underfunded for so long and because it is crucial for the nhs. it is right we invest in the nhs but you will not get the results if you do not also invest in social care. liberal democrats have been championing the case for social ca re been championing the case for social care and giving money to councils and unpaid carers, and without that investment in care i do not think we will see communities and people and families being able to recover

through this pandemic. i think it is a huge mistake. you were a cabinet minister in the coalition years, where austerity was a policy that was undertaken for all the reasons we have heard from you and conservatives at the time. should the chancellor be doing more to rein in the huge borrowing figures we have heard today? let's be clear, what we did in order to get the deficit down was to invest and as secretary of state for energy and climate change i invested in green jobs and green industries of the future. we managed to nearly quadruple britain's renewable energy. we became the world leader in offshore wind. we gotjobs up north by working with private companies like siemens uk. we created jobs making winter turbines for the north sea and that is the sort of ambitious policy we need. that is what liberal democrats are arguing forand we that is what liberal democrats are arguing for and we have not seen that from the government. we are almost at the end of the programme.

final thoughts. the coalition confronted with the not as bad but not completely dissimilar challenge when they took over in 2010 did an awful lot of squeezing public budgets very quickly. this government is not interested in trying to do that at the same kind of pace. this however is a terrible situation of waste and see and how politicians on all sides propose to get out of this by the time of the next election. it is all about growing the economy again and i think the chancellor has shown he is willing to change approach, direction, policy, if the situation changes. there are many reasons why the situation could change from brexit to perhaps the vaccine over performing or underperforming, so this will not be the end. that is all we have time for today, there is continuing coverage on bbc news from the chancellor's statement on the spending review and we will be back on bbc two tomorrow at 12:15pm.

please join on bbc two tomorrow at 12:15pm. pleasejoin me then. goodbye.

this is bbc news. i'm simon mccoy. the headlines — the cost of coronavirus — the chancellor paints the true scale of the economic crisis facing the country, with the economy due to contract by 11.4%, the biggest fall in output in over 300 years. today's spending review delivers on the priorities of the british people. our health emergency is not yet over. and our economic emergency has only just begun. a pay freeze in england forjust under half of public sector workers — labour describes it as a ‘sledgehammer blow‘ for consumer confidence. many key workers, who willingly took on so much responsibility during this crisis are now being forced to tighten their belts. now, not in the

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