dealing with the deficit is a means to an end. austerity alone doesn't create -- doesn't create growth. it's a necessary but not sufficient step towards creating growth. but in the end, what we are absolutely dedicated towards is creating jobs. creating prosperity, creating investment. creating opportunity. creating optimism and hope in our country. and i think as david has indicated, we know we need to do more. constantly strive to do more to create and foster the conditions for growth. and i would particularly underline two areas. firstly, getting lending to british businesses, particularly small and medium sized enterprises. i've just met too many small companies who say they've got great business plan. they are healthy companies and they simply can't get ahold of money. they can't get ahold of the money on reasonable terms. they won't expand. they can't create jobs. we're doing a whole lot to try and fix that problem but i think we all accept in government we need to do more. and the final thing is, invest

in infrastructure. not just public money, but private money because we've got infrastructure, road, rail, energy, housing. much of which is just far too old. we need to invest in that for the future that helps create jobs today and a growing, prosperous economy in the future. with that, thanks again, and over to you. >> thank you very much. >> okay. [ applause ] thank you very much. we've got a roving microphone. who wants to ask the first question? sir? >> you've both given us a speech about how you're going to try and make things better. but it seems to me that neither are singing on the same hymn sheet. every time you come up with a policy, the dems come up with a policy you want to water it down. how are you going to work together to solve this crisis? >> what i would say -- thank you, sir. obviously, we're different parties.

conservative party, liberal democrat party. we don't always agree, but i would argue actually in the last two years, the government has actually done a lot of things that needed to be done. we've cut the deficit. we made difficult decisions about cutting some areas of public spending, about having to increase some taxes because we inherited a situation where our budget deficit was bigger than that in greece. so although we might have had different views, we put those aside. we cut the deficit for the good of the economy. we both also took some very difficult decisions on welfare. for the first time information our country we've put a cap on welfare and said that no family out of work should be able to get more in welfare than the average family gets in work. again, a difficult decision. one that's never been taken before, but we worked together to do that. and whatever the area, i would say, you know, whether it is getting immigration under control, where we put in place some tough limits, whether it's reforming our education system,

where we put in place much tougher standards in terms of discipline and teaching proper subjects like math and english, we're not always going to agree, but in the end, we've produced some pretty chunky, clear policy of things that needed to be done. now, of course, i would like to be running a conservative only government. nick would like to run a liberal democrat only government. you the voters, though, decided that no one won the last election and effectively you are asking us to work together. now i would argue, in spite of the differences we sometimes have, in spite of the arguments we sometimes are have, we have put those differences aside and taken pretty tough action on the deficit, on welfare, on education and i think this coalition government is delivering. but i accept it's a tough time in our country. it's a difficult time in our country and we've got more work to do. >> all i would add to that is, judge us by our actions, not by our words and with the greatest respect to the members of the press around, judge us by what we do rather than what people

say we are doing or not doing. if you look at what we've managed to do over the last two years, it's a pretty remarkable -- we were accused for a lot of that period of time that we were doing too much. rushing to try to do too many things at once. reforming welfare. reforming education. changing the tax system. fixing the broken banking system. fixing the black hole in our public finances. we were involved in military action in libya all at the same time. that's a lot for any government, single party or coalition party. i think about the things i care about. i am hugely proud of the things i fought for for my political life. more money for kids from disadvantaged backgrounds in school through the pupil premium. more apprenticeships and delivered by any government since the second world war. raising the allowance, the point at which you start paying income tax by the highest amount ever. these are things we're delivering through coalition in the same way david is delivering

for his party things his party believes in, but we're doing it in a coalition government. i think, you know, you always get ups and downs in politics. but i think the idea of politicians from different party setting aside their differences and working in the national interest is something that i hope most people think is a good thing to do. >> next question? the gentleman -- >> going to increase spending on manufacturing apprentices. i've been in this company 37 years. the last 20 years we haven't had apprentices. that skill base is -- we're all getting older. if you don't get your act together, you're not going to have the people here that are going to be able to do these jobs. are you going to increase money in manufacturing apprenticeships? have you got a plan for that? >> i've not only got a plan. we're doing it. apprenticeships are expanding at a rate they haven't done for a generation. during the course of this parliament, this coalition

government will deliver 250,000 more apprentices than were planned by the previous government. it's one of the things actually i think really brings both parties together is a kind of passionate belief that we've got to kind of give the same sense of esteem and respect for vocational education, including apprenticeships as we traditionally have for an academic university base. for too long there's been this barely disguised snobbery that says once you leave school the only good thing to do is to go to university. of course it's not right. and we know from the most competitive economies in europe and elsewhere, look at germany. look at denmark and some of these countries that have very successful economies. it's because they value vocational education just as much as academic education. and that's why we're investing huge amounts of extra money in expanding the number of apprenticeships which are available. >> about half the board of rolls

royce, half the board were apprentices. so the apprentices behind us have the ambition of not just working at this company but of running great companies like that. that's the motivation that fires us up and why we're putting money into apprenticeships and not just universities. next question. sir? hold on. we need a microphone for you. >> how can the uk government promote the equipment made in the uk has an appeal to the british farmer? >> say that again? >> how to make equipment in the uk that has appeal to the british farmer. >> i think it's going to be on quality. i represent a big constituency in the south of england. 400,000 square miles. a lot of agricultural land and the farmers that i represent, they want to buy the best. they want good equipment. and this is fantastic to be in this factory, the last tractor factory in britain that makes, i think, 92% of what you make is for export. but you're also supplying the domestic market.

i think in the end if we want a healthy farming industry, what we've got to recognize is that that really depends on us as consumers going into shops and supermarkets and wanting to buy quality british produce. of course we've got the common agricultural policy and all the schemes and grants and everything to help farmers. but in the end if you want healthy farming, you want consumers saying, british meat is the best. british food is the best. i want to demand the best and i want to go out and buy the best. that will be good for british agriculture and good for your business, too, as you sell them the tractors they need to do all the work they do on our behalf. next question for the gentleman over here. >> france is one of our biggest customers. with the recent elections in france now with the socialist government, how optimistic are you that they will remain one of our biggest customers? >> i think france is one of our oldest, strongest, most important allies, sometimes

rivals as well over our history. i think president hollande has made it very clear that he wants to place a lot of emphasis on growth. i don't think anyone would disagree. who is going to disagree with someone saying we have to grow our economies. that's exactly what we're about. he knows as well as all of us do that you can't create growth on the kind of shifting sands of debt. you have to create stable foundations upon which you grow an economy. and i think in all of us in the government here in london are looking forward to working with him, working with his ministers on the new ideas they've got about how we can foster growth because that's good for the french economy. good for french consumers. it's good for the british economy and it's good for british workers, not least here because you produce so many things that are then bought in france. so any emphasis on growth from whatever direction of the

political spectrum has got to be a very good thing. >> i'd i agree with that. if you look at what we're doing here. we got interest rates at a record low. we've got a big budget deficit so we can't increase spending. can't do tax cuts that are unfunded. so the way to get growth in our economy, the way to get growth in the french economy is look at all the things that hold our businesses back. can we get our banks lending. can we make it easier to employ people? can we make it cheaper for firms to go out and employ people? can we invest in apprenticeships so there are better people for companies to take on. and across europe, we talk about the single market. we haven't even completed it. you know if you look at things like energy policy, if you look at digital technology if you look at things like music and things that we're good at in this country, the single market isn't even finished. services which are very good out in our country we haven't finished. one of the arguments we've got to have with the new french president as with all the other european countries is we've got this great european market, but let's finish it because that's

one of the best boosts we could give to growth when actually our interest rates are already low and our budgets are badly stretched. and that's the discussion we'll be having with the new french president. next question. sir. there we go. we need a microphone. >> the cost of fuel on running these machines in particular has an impact on food costs. what can the government do to alleviate some of that costs, particularly for british farmers? >> well, obviously with british farmers, we've got the issue of red diesel. so there is an advantage already in -- built into the system. looking more generally at fuel prices which i know are extremely high at the moment, the government has tried to help because we canceled some of the tax increases that were in place. we also cut fuel duty by a penny the last budget. we spent 4 billion pounds trying

to keep diesel prices and petrol prices low. it's difficult to fight against the overall increase in oil prices that's happened worldwide. so i think it is testing. we're going to rely on businesses as well to keep developing, as i know you are. cleaner and more efficient engines to try to keep costs down because oil prices in the end are what drives the price. but if we can make sure that the word diversifies its energy supplies and we become less reliant on petrol and diesel in other elements of life, then it will be -- that will have a good effect. next. do you want to just wait for the -- here she comes. >> what are the positive items for 2012, of course is the olympics. what do you guys see as the

positive legacy that we'll get within the country? >> i think -- i don't think in many ways we get woken up to what a big, big thing this is. it is unbelievably exciting. the eyes of the world will be -- it's a well-worn cliche but it is so true. it's going to have, i think, a massive effect on that part of london in the long run. i think it's going to be a brilliant opportunity for us to kind of show ourselves off as an optimistic country, as an open country, as a diverse country, as a young country, as a country open to the -- well, i hope we win a few sort of medals in the process. there are lots of ways you can judge the legacy. part of the legacy is, does it help create jobs, particularly in that part of london. another legacy which i think is a really important one is will they inspire lots of youngsters who are now at school who look at the olympics to take up sport in a way that they might not now. if you just crack that, that would already have such a dramatic effect on the health

and well-being of the young people in this country. so i think it's an immensely exciting. i hear some people say, there's going to be disruption. yeah, there is going to be a bit of disruption. thousands upon thousands of people. but at the same time a showcase for us to show ourselves off to the rest of the world. >> actually, this week, we've got the school games taking place at the olympic site. and i agree that there hasn't been enough competitive sport in our schools for many, many years. we need to get competitive sport back, team sport back in schools. and the school olympics has been a great success. over half the secondary schools in the entire country have taken part and this week the finals are taking place at the olympic park. the other thing is, all of the venues we're securing a legacy for. so it's not like some olympics where you build great facilities and then a few years later they are all covered in tumbleweed or you've actually had to take them down. almost all of them are going to

have a real, tangible legacy and huge amounts of use for the future. whether the velodrome for cycling or the aquatic center for swimming. we've secured legacy. it's one of the reasons we won the contract is it's a legacy games with real use for the facilities afterwards. next question. gentleman at the back. >> will there be more quantitative easing this year? >> oh, no, we don't want to talk about that because it's the bank of england which is entirely independent as it should be. but i think one thing that has been obvious in everything we've done over the last two years is if you want in the jargon of a monetary authorities central banks to do their bit to kind of get some money into the system, they are only really going to feel free to do that if they feel the government is doing its side of the bargain by kind of filling the black hole in the public finances. so there's been a lot of

activity from the bank of england over the last period, quantitative easing. it's immensely important to the british economy. i think it's unlikely that would have been possible if the government at the same time hadn't been kind of dealing with this deficit and debt issue at the same time. >> that's absolutely right. sometimes what people say to us why not just go easy on the public spending decisions. why not go easy on the deficit and the debt. if we did so you could see any rates go up. and for every 1% on interest rates, basically hits the typical family mortgage by about 1,000 pounds a year. so it would be totally self-defeating which is why i think we need to stick to the plans we set out. tough and difficult though those are. we're going to take a couple of questions from the press, if that's okay. mr. robinson from the bbc. >> thank you very much, deputy prime minister. nick robinson from bbc news. europe is turning its back on austerity. do you fear that britain is beginning to turn its back on austerity?

if growth is a priority, why are you forcing him to back house of lords reform and mr. cameron, why on earth are you letting him? >> let's deal with this issue of what you call austerity, what i call efficiency, dealing with our budget and getting growth at the same time. that's what we need to do. we need to do both those things. if you look at what president hollande is suggesting in france, his plan for getting rid of budget deficit is on a pathway with ours. i think it's a bit of a myth to believe that somehow there's some people in europe that are going to spend a lot more money and those of us who realize we have to deal with our debt and our deficit. we all have to deal with our deficits. if we don't, our interest rates will go up. that's the fact and that's why we've got to deliver these difficult public spending reductions that also everything we can do to get growth at the same time. now house of lords reform, okay. i wouldn't for a minute say this is the most important thing the government is doing. of course it isn't.

but parliament is quite capable of doing more than one thing at a time. do i think it would be a good idea if actually parliament delivered a house of lords that had people who were elected by you, the members of public in the house of lords to pass the laws that we all have to live by? sure i do. and every single party, major party, went into the last election saying that they wanted to reform the house of lords. so i think it's a perfectly sensible reform for parliament to consider. as i say, what matters, the things we're really focused on, getting that deficit down. getting our economy moving and creating a country and a society that's more worthwhile where people feel if i put in, i get out. if i work hard, i do the right thing, i will be able to do better for myself and my family. that's the program that the government is really pursuing. but sorting out some of our constitution at the same time, i don't see why parliament can't deal with that, as i said. >> on the first point, it's

worth remembering that the new french president, i think he said he's committed to balancing the books in france by 2017. now when we discovered as a coalition government last autumn that there was more pressure on the public finances than we'd anticipated, you know what we did? we didn't say we're just going to cut more. we said, okay. we're going to take a little bit longer. we're going to take a couple more years to do this. i think some of the caricatures that suggest somehow on the other side of the channel people aren't dealing with their deficit at all and we're rushing to do it much quicker, they're just that. they are caricatures. trying to deal with their deficits over a reasonable period of time. on house of lords reform. you know what? i care a lot more about apprenticeships than house of lords reform. i care a lot more about the fact that as of next april, 2 million people on low pay will be taken out of paying income tax for the first time because we're raising the point at which they have to pay income tax.

i care more about children from disadvantaged backgrounds doing well out of school and getting ahead and having real opportunities in life than i do about house of lords. it doesn't mean you can't do other things. back grounds getting ahead in life. it doesn't mean that you can't do other things. my own view while it is highly controversial i think most people think the people who make the laws of the land should be elected by people who have to obey the laws of the land is not as controversial. a smidgen of democracy i don't think will go amiss. >> thank you. you say you have heard the message from votes. there is no real sign that you're actually listening since friday's results came in you said you were going to drill down on the deficit. you said that before. you are going to get on the side of hard working people. you said that before.

i'm struggling to see what has changed since the hammering that you both got last week. >> i think we have to focus on the things that matter most. that is the economy. that is people's living standards and getting the economy moving. if you ask what i'm going to be doing or the deputy prime minister it will be checking that the work program is up and running and giving them jobs. it will be making sure the apprentices that we promised are really being delivered. it's getting around the world and opening up our export markets. it's about hammering this argument with the pank banks a making sure they are lending money. and going through every sector whether life sentences or energy and saying what more can we do to get our economy moving and going. that is going to be the focus of my time, the focus of the deputy

prime minister's time. it is focus, delivery and proving that this is a coalition government with our differences but came together and can deliver in the national interest during the life of this parliament. >> one specific thing, chris. i think it is not only on the prime minister that where the parties got a particular beating last week was in wales, scotland and the large cities of england. that seemed to be a pattern. i take one very important message from that which is that we much double our methods to govern for the whole country. i think there is a particular dilemma. there is a particular dilemma in those parts of the country which are particularly located in

scotland, wales and north of england where for the last 10, 15, 20 years they have been reliant on subsidies from governments in white hall and those were funded by explosive growth in the city of london. what we had for years and years was an economic model which is now broken, an economic model relied on governments sucking out to the city of london and letting banks get away with blue murder. there is tax revenue transported up through public subsidy. that was all fine as long as the money was there. it was fine as long as it kept going round and round. it has stopped. whoever is in government now will have to face the difficult challenge of what to do to rebuild the economies that are lop sided. that is why i believe so passionately in us investing more in manufacturing because

that helps those parts of the economy in the north of england. if you think we can do that between friday and tuesday you can't do it that quickly. i think the lesson of last week's elections is we double our efforts. >> last question. >> i wanted to ask you to all the people who are frustrated about lack of job opportunities and the rest of it, what has been holding you back up until now? what has been the problem? >> i think the biggest problem is what we have found is that the damage done during the recession was much greater than people first realized. the level of debt in our house holds, the level of debt in our banks and our government has made recovery difficult. i think what is happening in our economy is there is some rebouncing going ahead. compared with the election there are 600,000 more people employed in the private sector.

exports have come up. there are some encouraging signs in terms of manufacturing investment. when you think of the enormous boom we had in terms of of housing and banking and financing, government spending and also i would argue uncontrolled immigration, as well, the drivers of growth were unsustainable. it is pain staking work getting our economy to grow. it must be the right thing to try to deliver growth which is based on real hard work and effort. proper jobs, proper manufacturing and proper industry based on the fact that government can't go on spending and borrowing. i think what we have to do is be very frank with people that it is tough and difficult but these are the right steps to take so we don't just pump the bubble back up and try to enjoy the growth we had which was something of a mirage in recent

years. it will take time but it will be built to last rather than as the last recovery was built on sand. it is difficult and politics is not easy obviously when you're working in coalition and when you are dealing with difficult economic circumstances. but the most important thing is to do the right thing and to do the right thing by the people in this country who want government to think about the long term. >> just to underline that point. the latest forecasts are that the british economy will be a full 11% smaller by 2016 than it would have been if the crash in 2008 would not have happened. 11% smaller. no government can wave a magic wand and wish that away. it is the nature of the cardiac arrest takes some time to recover and that means the economy is smaller than it would have been. i'm very optimistic for the

future of this country. here producing these extraordinary tractors. one is coming off the production line every four minutes. i think we have under sold our strength and potential as a country as a manufacturing powerhouse. manufacturing now represents about 11% of the total value of our economy. there is no reason we shouldn't hope that should increase to 22% if not more. and that is what we are dedicated to doing over the long term. rebalancing the british economy making sure growth is sustainable. you can't do it overnight but we are taking the right steps along that path. >> i thank you all very much for coming. i know some of the production line has still been working. i am worried we shut down too much for too long. thank you for your questions. thank you very much indeed.

[ applause ] live pictures on capitol hill from the rayburn office building. members of the house arms services committee meeting to consider the national defense bill calling for a budget of $554 billion. it would give active duty service members a 1.7% pay raise and reduce the number of military personnel by 21,000. joining us is c.q. to talk about what is going on. frank, the republican defense budget is higher than the white house proposal. at the same time we have the automatic budget sequester

spending cuts starting in january. that would take a meat ax approach. how much members reconcile this? >> it is an interesting situation because in the house they are ignoring the bca and setting aside for defense about $8 billion more than the bca would permit. it is going to come down to a discussion between the senate and the house as to reconcile the differences. in the house if you don't meet the caps on the defense side that means it is going to put more pressure on the domestic side as we saw in the ryan budget resolution a lot of the cuts that he is suggesting would have been on domestic discretionary spending. >> the white house has called for closing of more military bases. military bases issue apparently is not an item now. can we expect the committee to support th