yes, we have our responsibilities to make sure that we are living up to the military covenant and are doing all that we can for our armed forces and their families, but it is something that communities, individuals and businesses can do, too. i understand that in hexham, there will be a nine-hour forces celebration. when those servicemen and women are off duty, there will be discounts, as he said, from restaurants and pubs, so i expect that it might get a bit lively, and i am sure that he will join in the fun. >> angus robertson. >> a consequence of yesterday's budget and vat rise is 26.5 million pounds of new overheads for the nhs in scotland.

having promised to ring-fence health spending, will the treasury now cover those costs, or will this be another broken promise, just like lib dem opposition to a vat rise before the election? >> of course, our action on national insurance contributions has saved the nhs money, which would not be available under a labour government. the point i would make is that that benefits scotland. the fact that we are protecting the nhs and nhs spending means that money will be available in scotland as well. the shadow health secretary has now said that health should not be protected, and that the nhs should be cut.

that is now, take note, the official position. the leader of the opposition is nodding -- cutting the nhs is now official labour policy. >> dr. julian lewis. >> number 13, mr. speaker. >> i thank the honorable gentleman for his question. we are conducting a counter- insurgency operation in afghanistan. he asked specifically about the military purpose of routine foot and vehicle patrols in afghanistan. if you are going to win the counterinsurgency and succeed in what is called "war amongst the people", you have to be among them, protecting them from the insurgents. that is how we are going to create a more stable and peaceful afghanistan, from which we will be able to return, leaving the afghan forces in control. >> dr. julian lewis. >> does the prime minister accept that there are other ways of fighting counterinsurgencies that do not involve sending out uniformed personnel along predictable routes, day after day, to be sniped at and blown up? will he request his military advisers to focus on long-term strategies that could achieve our strategic aims without having to pay such an unnecessarily high price? >> i know that my honorable friend takes a close interest in these matters, and i have arranged for him to meet senior

officials and military advisers, so that he can explore his ideas with them. all that i would say is that the team that president obama has put in place, and the team that we have in terms of both military and civilian leaders, have brought great impetus to the campaign. it is difficult to see, if we are trying to fight a counterinsurgency, how we can do so without having a number of active patrols to protect the people from the insurgents. >> order. i gently remind the house that this is a closed question on afghanistan. does anybody wish to come in on it? no? mr. jonathan evans. >> bearing in mind the opposition's claim that in europe, britain is now isolated, will my right honorable friend please indicate how on earth he managed to secure both french and german agreement to the announcement in relation to the bank levy in the budget yesterday? >> my honorable friend makes an excellent point. in the budget yesterday, my right honorable friend the chancellor announced unity between the french, the

germans, and the british on introducing a bank levy. the one group of people who are isolated, and who say that we have to wait for the rest of the world before we can ask our banks to make a proper contribution, is the party opposite. once again, they have no proposals to fill the enormous black hole that the government are getting to grips with. >> anne mcguire. >> the o.n.s. reported that while the richest 10% spent 1 pound in every 25 pounds of their income on vat, the poorest 10% spent 1 pound in every 7 pounds of their income on vat. how, then, can the prime minister justify his oft- repeated refrain that we are all in this together? >> what i would say to the honorable lady -- it is an important point and the red book sets it out -- is that the richest 10% will pay in cash terms 15 times as much in vat as the poorest 10%. the important point to take into account and look at is the budget as a whole. in the budget as a whole, we can see thaa the richest pay the most both in cash terms and as a percentage of their income.

what we have done, by massively increasing child tax credits, is to ensure that there is no increase in child poverty. what a contrast that is with the figures since 2004. the labour party put up child poverty by 100,000. that is the difference. >> order. >> each week that the house of commons is in session, we air prime minister's questions live at 7 the yen eastern on wednesday and sunday night at 9:00 p.m. eastern and pacific. at c-span.org can find the video archive of past prime ministers questions. >> on wednesday, you can watch live coverage of the british prime minister's question some with david cameron. that is live up 7 the yen eastern on c-span2.

>> next, remarks by the british finance minister, george osborn. tuesday, he delivered a statement to the house of commons on his butt to report. this is one hour 10 minutes. mr. chancellor of the exchequer. >> mr. deputy speaker, -- >> this emergency budget deals decisively with our country's record debts. it pays for the past, and it

plans for the future. it supports a strong, enterprise-led recovery, it rewards work and it protects the most vulnerable in our society. yes, it is tough, but it is also fair. this is an emergency budget, so let me speak plainly about the emergency that we face. the coalition government has inherited from their predecessors the largest budget deficit of any economy in europe, with the single exception of ireland. one pound in every four we spend is being borrowed. what we have not inherited from our predecessors is a credible plan to reduce their record deficit-this at the very moment when fear about the sustainability of sovereign debt is the greatest risk to the recovery of european economies. questions that were asked about the liquidity and solvency of banking systems are now being asked about the liquidity and solvency of some of the governments who stand behind

those banks. i do not want those questions ever to be asked of this country. that is why we have set a brisk pace since taking office. in the past seven weeks, we have announced, conducted and completed a review of this year's spending and identified £6 billion of savings. we have announced, established and received the report of the independent office for budget responsibility. the power that the chancellor has enjoyed for centuries to determine the growth and fiscal forecasts now resides ith an independent body immune to the temptations of the political cycle. and we have examined, decided on and in some cases halted the mass of unfunded commitments, ious and overcommitted reserves that greeted us on entering office. this is early, determined action, and it has earned us credibility in international markets. it has meant that our promise to deal decisively with the deficit has been listened to. market interest rates for britain have fallen over the past seven weeks, while those of many of our european neighbors

have risen. those lower market interest rates are already supporting our recovery. but unless we now deliver on that promise of action with concrete measures, that credibility-so hard won in recent weeks-will be lost. the consequence for britain would be severe: higher interest rates, more business failures, sharper rises in unemployment, and potentially even a catastrophic loss of confidence and the end of the recovery. we cannot let that happen. this budget is needed to deal with our country's debts. this budget is needed to give confidence to our economy. this is the unavoidable budget. i am not going to hide hard choices from the british people or bury them in the small print of the budget documents. the british public is going to hear them straight from me,

here at this dispatch box. our policy is to raise from the ruins of an economy built on debt a new, balanced economy, where we save, invest and export; an economy where the state does not take almost half of all our national income, crowding out private endeavor; an economy not overly reliant on the success of one industry, financial services-important as they are-but where all industries grow; an economy where prosperity is shared among all sections of society and all parts of the country. in this budget, everyone will be asked to contribute. but in return, we make this commitment: everyone will share in the rewards when we succeed. when we say thaa we are all in this together, we mean it. the first challenge for this budget is to set the fiscal

mandate. in other words, our overall objective for the public finances. the previous government had two fiscal rules, one for debt and one for the current budget. they were supposed to force chancellors to set aside money in the good years so that they could borrow sustainably when the economy turned down. they completely failed in that task. as this is the last budget in which this golden rule will appear, i would like to be the last chancellor to report on it. we are set to miss the golden rule in this cycle by £485 billion. we now know the intrinsic weakness in backward-looking fiscal rules: past prudence was an excuse for future irresponsibility; and the judge of the rules was the very same chancellor they were supposed to be restraining. we propose a more credible approach. our fiscal mandate will be forward-looking, and the judge of whether we are on course to meet it will be not the chancellor, but the independent office for budget responsibility. on behalf of the house, i thank sir alan budd and his fellow

committee members, geoffrey dicks and graham parker, for their highly professional effort. in the space of just seven weeks, i believe we have established the office for budget responsibility as a permanent improvement to economic policy making and the transparency of government. the legislation to put the office on a statutory footing will now be drawn up and i hope it will command all-party support. i now turn to what that fiscal mandate will be. the view of the international community was clearly expressed at the latest g20 meeting, and we will be taking the same message to the g20 summit in toronto this weekend. surplus countries should do more to support global demand. so we welcome china's announcement to come off the dollar peg.

at the same time, the international community believes countries with high fiscal deficits need to accelerate the pace of fiscal consolidation. that is precisely what we now propose to do. the formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015 to 2016 in this budget. this mandate is structural, to give us flexibility to respond to external shocks; current, to protect the most productive public investment; and credible, because the obr, not the chancellor, will decide on the output gap. in order to place our fiscal credibility beyond doubt, this mandate will be supplemented by a fixed target for debt, which in this parliament is to ensure that debt is falling as a percentage share of gdp by 2015 to 2016. i can confirm that, on the basis of the measures to be announced in this budget, the judgment of the obr, which we published today, is that we are on track to meet those goals. indeed, i can tell the house that, because we have taken a cautious approach, we are set to meet them one year earlier, in 2014 to 2015. to put it another way, we are on track to have debt falling and a balanced structural current budget by the end of this parliament.

at this point in the budget speech, the chancellor would normally read out their own set of economic and fiscal forecasts, and they normally tell the house more about the political cycle than the economic one. those days have gone for good. instead, i will give the house the latest forecasts from the independent obr, taking into account the measures in the budget. growth in the uk economy for the coming five years is estimated to be 1.2% this year and 2.3% next year; then 2.8% in 2012 followed by 2.9% in 2013; and then 2.7% in both 2014 and 2015. consumer price inflation is expected to reach 2.7% by the

end of the year before returning to target in the medium term, and let me take this opportunity to confirm that the inflation target remains at 2% as measured on the consumer prices index. the unemployment rate is forecast by the obr to peak this year at 8.1% and then fall for each of the next four years to reach 6.1% in 2015. some have suggested that there is a choice between dealing with our debts and going for growth. that is a false choice. the crisis in the eurozone shows that unless we deal with our debts, there will be no growth. these forecasts demonstrate that a credible plan to cut our budget deficit goes hand in hand with a steady and sustained economic recovery, with low inflation and falling unemployment. what is more, the forecast shows a gradual rebalancing of the economy, with business investment and exports playing a greater role and government

spending and debt-fuelled consumption a smaller role. a sustainable private sector recovery built on a new model of economic growth, instead of pumping the debt bubble back up. part of the reason, as we have always argued, is that tighter fiscal policy can enable interest rates to stay lower for longer. as the governor of the bank of england confirmed this week at the mansion house: "if prospects for growth were to weaken, the outlook for inflation would probably be lower and monetary policy could then respond". the subject of interest rates brings me to say this about attempts to compare directly last week's forecasts with this one. as the obr notes in today's budget document, any such comparison would be "misleading", because last week's forecast included the lower interest rates that expectations of this week's budget have already brought about. so, as sir alan has written, actually to follow the fiscal path set out by the previous government "would lead to higher interest rates and...lower economic activity" than his forecast showed. let me now turn to the measures in the budget designed to deliver this accelerated reduction in the structural deficit. the coalition believes that the bulk of the reduction must come

from lower spending rather than higher taxes. the country has overspent; it has not been under-taxed. our approach is supported by the international evidence, compiled by the oecd, the international monetary fund and others, which found that consolidations delivered through lower spending are more effective at correcting deficits and boosting growth than consolidations delivered through tax increases. that is the origin of our 80:20 rule of thumb-roughly, 80% through lower spending and 20% through higher taxes. this evidence has been available in the treasury for some time, but was published only in a redacted form by the

previous government. we intend to follow international best practice and the treasury's own analysis. my measures today mean that 77% of the total consolidation will be achieved through spending reductions and 23% through tax increases. i believe this gets the balance right. i now turn to the obr's fiscal forecasts. as a result of the measures i will announce today, public sector net borrowing will be £149 billion this year, falling to £116 billion next year, 89 billion in 2012 to 2013 and £60 billion in 2013 to 2014. by 2014 to 2015, borrowing reaches £37 billion-exactly half the amount forecast in the march budget, and in 2015 to 2016, borrowing falls further to £20 billion.

as a share of the economy, borrowing will fall from 10.1% of gdp this year to just 1.1% in 2015 to 2016. we now know, thanks to the obr forecast, that the structural current deficit is significantly larger than we were told. 0.8% of gdp or £12 billion higher next year. thanks to my action today, the structural current balance will be minus 4.8% of gdp this year. that deficit will then be eliminated to plus 0.3% in 2014 to 2015 and plus 0.8% in 2015- 16. in other words, it will be in surplus. public sector net debt, as a share of gdp, will be 62% this year, before peaking at 70% in 2013 to 2014. because of our action today, it then begins to fall, to 69% in 2014 to 2015 and then 67% in 2015 to 2016, whereas under the plans we inherited, debt would have increased in every full year of this parliament. the house will want to know that, as a result of our measures, debt interest payments will be £3 billion a year lower by the end of this parliament than they would have been. i have one further announcement to make regarding macro- economic policy. i can confirm that, as set out

in the coalition agreement, the government will not be joining the euro in this parliament. i have therefore abolished the treasury's euro preparations unit. yes, one does exist, and the official concerned has been redeployed to more productive activities. let me now turn to my other decisions on public spending. the state today accounts for almost half of all national income, which is completely unsustainable. all parties in the house now accept that spending needs to be cut, and we have made a start, but we need to go much further if we are to meet our fiscal mandate and see debt falling by the end of this

parliament.+ today we are setting out the overall path of public spending that will achieve that. let me begin with current spending. current expenditure will rise from £637 billion in 2010 to 2011 to £711 billion in 2015 to 2016. although this is an increase, the house should remember that we inherit a rapidly rising bill for debt interest. a bill that will not start falling until the debt itself starts to fall. debt interest payments alone will cost the taxpayer a quarter of a trillion pounds over this period. one of my predecessors used to call this spending the costs of social failure, but i say it is the price of economic failure. compared with the plans set out by the previous government, i am announcing today additional current expenditure reductions of £30 billion a year by 2014 to 2015. the plans for public investment we inherit from our predecessors envisage a steep drop from £69 billion last year to £46 billion in 2014 to 2015. after the initial in-year reductions, the question we have been faced with is how much further to go on capital spending. well-judged capital spending by government can help provide the

new infrastructure our economy needs to compete in the modern world. it supports the transport links we need to trade our goods, the equipment we need to defend our country and the facilities we need to provide quality public services. i think an error was made in the early 1990s when the then government cut capital spending too much, perhaps because it is easier to stop new things being built than to cut the budgets of existing programs. we have faced many tough choices about the areas in which we should make additional savings, but i have decided that capital spending should not be one of them. there will be no further reductions in capital spending

totals in this budget, but we will make careful choices about how that capital is spent. the absolute priority will be projects with a significant economic return to the country. assessing what those projects are will be an important part of the autumn spending review. the government can also dispose of assets that should rightly be in private ownership. yesterday, we launched the sale of high speed 1. we will look at how to dispose of our shareholding of nats, the air traffic control services. we will aim to sell the student loan book and look at options around early repayment for individuals, and we will resolve the future of the tote, at last. my right hon. friend the secretary of state for business, innovation and skills will also facilitate a private capital njection into the royal mail group, something that has been long overdue. before i turn to discuss departmental budgets, i need to say something first about another area of spending, the civil list. the civil list is the government's support for her majesty the queen in her duties as head of state, and i am sure that everyone in this house will want to join me in recognizing the queen's loyal service and immense contribution to public life. the amount provided by the civil list has remained unchanged over the past 20 years, at £7.9 million. this has required careful management. because of inflation, the annual payment is today worth only a quarter of what it was 20 years ago.

i can announce that, with the full agreement of the queen, the civil list will remain frozen at £7.9 million for the coming year, and i will propose a new means of consolidated support for her majesty for the future at a later date. in addition, the royal household has agreed that, in future, civil list expenditure will be subject to the same audit scrutiny as other government expenditure, through the national audit office and the public accounts committee of this house of commons. i believe that this will mean clear accountability in this house and that it will strengthen public confidence. let me turn now to my decisions on departmental expenditure limits. in recent years, chancellors have been reluctant to explain what their total spending projections will mean for whitehall departments, and that is entirely self-defeating. it normally takes people at the institute for fiscal studies less than 24 hours to work it out for themselves and let the public know the truth. i will save them the effort.

we have inherited from the previous government spending plans to cut departmental budgets by £44 billion a year by 2014 to 2015. this implies an average real reduction for unprotected departments of 20%. not that this was ever said, or a single pound of cuts to programs even identified. because the structural deficit is worse than we were told, my budget today implies further reductions in departmental spending of £17 billion by 2014 to 2015. we have committed to providing the nhs with real increases throughout the parliament, and we will honor our international aid obligations to the poorest in the world. once these are taken into account, the budget figures imply that other departments will face an average real cut of around 25% over four years.

clearly, if we can find any additional savings to social security and welfare beyond those that i will outline shortly, then that will greatly relieve the pressure on these departments and that 25% figure. of course, not all departments will receive the same settlement. i recognize, for example, the particular pressures on our education system and on defense. final departmental settlements, and the final split between departmental expenditure and annually managed expenditure on welfare, will be set in the spending review. rather than follow the usual practice of keeping the date of that review a secret until a few weeks before it happens, let me tell the house that it will be presented on wednesday 20 october. a further way that we can ease the pressure on public services is to agree that we need to restrain public sector pay in these difficult times, and we need to do something about the spiraling costs of public sector pensions. many millions of people in the private sector have in the past couple of years seen their pay

frozen, their hours reduced and their pension benefits restricted. they have accepted that, because they knew that the alternative in many cases was further job losses. the public sector was insulated from those pressures but now faces a similar trade-off. i know that there are many dedicated public sector workers who work very hard and did not cause this recession, but they must share the burden as we pay to clean it up. the truth is that the country was living beyond its means when the recession came, and if we do not tackle pay and pensions, more jobs will be lost. that is why the goveenment are asking the public sector to accept a two-year pay freeze, but we will protect the lowest paid. in the past, i have said that we would be able to exclude the 1 million public sector workers earning less than £18,000 from a one-year pay freeze. today, because we have had to ask for a two-year pay freeze, i extend the protection to cover the 1.7 million public servants who earn less than £21,000 a year. together, they make up 28% of the public sector work force. they will each receive a flat pay rise worth £250 in both years, so that those on the

very lowest salaries will get a proportionately larger rise. in recognition of our armed services who are risking their lives for us all in afghanistan, we have also doubled the operational allowance to £4,800. we have asked will hutton to draw up plans for fairer pay across the public sector without increasing the overall pay bill, so that those at the top of organizations are paid no more than 20 times the salaries of those at the bottom. the culture of excessive pay at the very top of the public sector simply has to end. we also need to deal with the cost of public service pensions. this is one of the greatest long-term pressures facing our nation's finances. the obr today publishes figures showing that by 2015 to 2016 we will be spending over £10 billion a year simply to meet the gap between pension

contributions and payments to the unfunded pensions that they support. that is why i have asked john hutton to carry out an investigation. as the work and pensions secretary in the previous government, he brings experience and an unbiased approach. he will provide an interim report in september this year to help inform any decisions required for the spending review, and a full report in time for next year's budget. the government will also accelerate the increase in the state pension age to 66. a call for evidence will be launched later this week, and we will consult on whether to phase out the default retirement age. let me now address the largest bill in government, the welfare bill. it is simply not possible to

deal with a budget deficit of this size without undertaking lasting reform of welfare. it has been a key component of most successful fiscal consolidations elsewhere in the world and, around europe, countries are now tackling their benefits bill. germany has already announced 30 billion worth of cuts to welfare spending, and others are taking similar steps. here in britain, the explosion in welfare costs contributed to the growing structural budget deficit in the middle part of this decade. total welfare spending has increased from £132 billion 10 years ago to £192 billion today. that represents a real-terms increase of a staggering 45%, and it is one of the reasons why there is no money left. it has also left an increasing number of our fellow citizens trapped on out-of-work benefits for the whole of their lives. a greater proportion of our children grow up in workless households than any other country in europe. we are wasting the talents of millns, and spending billions on it in the process, so we will increase the incentives to work, and reduce the incentives to stay out of work. we will focus our benefits more towards those in need, and we will end some one-off payments that the country cannot afford any more. . .

in time for the next budget, we will also publish -- publish proposals to move the indexation in the tax system from rpi to cpi in a way to protect revenues. spending on tax credits has increased from 18 billion pounds in 2003 to 30 billion pounds this year. this is an unsustainable rise. there are over 150,000 families with incomes over 50,000 pounds receiving tax credit. taking to account the various disregards that means families earning up to 83,000 pounds are

eligible for this means tested benefit. the country cannot afford this anymore. we need to target tax credits on those who need the help most. so we reduce payments to families earning over 40,000 pounds next year and then align the thresholds for the child and family element. we will increase the taper rate. we remove the baby element for our new children from april 2011. we removed the one-off payment to new workers over 50 from april 2012. we reduce the income disregard from 25,000 pounds to 10,000 pounds and then to 5,000 pounds. we introduce an income disregard for income falls. we reduced that dating from three months to one month. and we will not introduce the pre-election promise of a new tax credit element for infants. sadly there are further benefits which our country can no longer afford. we will abolish the poorly targeted health in pregnancy grant from april 2011.

at the same time we will restrict the sure start maternity grant to the first child only. and we will expect lone parents to look for work when their youngest child goes to work -- goes to school. we've decided we simply cannot afford to extend the saving gave way and we've also had to take a difficult decision about child benefit. some of suggested we means tested and others that we ax it. all of these proposals involve issues of fairness. this benefit is usually claimed by the worker. it would mean the working mothers received less than the non-working partner of a millionaire. means test it and we would have to create a massively complex new system to assess household incomes. i did not propose to do these things. i know many working people feel that their child -- their child benefit is the one thing they get without asking from the state. so to control costs, we've decided to freeze child benefit for the next three years. this is a tough decision, but i believe it strikes the right

balance between keeping intact this popular universal benefit while ensuring that everyone across the income scale makes a contribution to help our country reduce its debts. [unintelligible] that brings me to another disability. we will continue to support them and we will not reduce the rate of which this benefit is paid. three times as many people claim it today that when it was introduced 18 years ago and that costs have quadrupled in real terms to over 11 billion pounds a year, making it one of the largest items of government spending. we will introduce a medical assessment for disability living allowance from 2013, which will be applied to new and existing claimants. this will be a simpler process than the complex forms they have to fill out at present. that way we can continue to

afford paying this important benefit to those with the greatest needs, while significantly improving incentives to work for others. mr. deputy speaker, spending on housing benefit has risen from 14 billion pounds 10 years ago to 21 billion pounds today. that is close to a 50% increase over and above inflation. costs are completely out of control. we now spend more on housing benefit than we do on the police and on universities combined. and among these enormous numbers for total spending, there are equally enormous individual claims. there are some families receiving 104,000 pounds a year in housing benefit. [unintelligible] and the cost of that single award is a collective the total income tax and national insurance paid by 16 working people on median incomes. it is clear that the system of housing benefit is in dire need for reform.

we will do that by resetting and restricting local housing allowances. operating deductions, reducing certain awards, readjusting support for mortgage interest payments, limiting social tenants' entitlement to appropriately sized homes, and lastly, we will for the first time introduce maximum limits on housing benefit -- from 280 pounds a week for a one-bedroom party -- property to 400 pounds a week for four-bedroom or larger. our package produced the cost of housing benefit by $1.8 billion a year by the end of parliament, or just 7% of the total budget but it will improve incentives to work. at the time and time we will target more resources for those who needed, by increasing the budget for discretionary housing payments by 40 million pounds. and we will cover the cost of additional rooms for those claimants with a disability who need a carer.

mr. speaker, taken together, all these measures to control the costs of welfare will save the country 11 billion pounds by 2014-2015. governments in the past have said that they were going to get prips with welfare and reward work. we are delivering. my right honorable friend will bring forward proposals to support work and encourage a spending review. but as i said right at the start of the speech this budget is not just about paying for the bills of the past. it is also about planning for the future. it is my deeply held belief that a genuine and long-lasting economic recovery must have its foundations in the private sector. that is where the jobs will come from, and we will do absolutely everything to support their creation. we argued that imposing a jobs tax was the last thing britain nneded in a recovery, and the businesses of the country agreed with us. we will adopt a different approach.

we will make it cheaper for companies to employ people. from april 2011, the threshold at which employers start to payer national unchurched -- start to pay national insurance will rise by 21 pounds per week above indexation. the cost of hiring people on incomes lower than 20,000 pounds will be far less than it is today. and in one move we will have lifted 650,000 employees out of this tax altogether. but if we're to have a sustained, job-creating recovery, we need more visits -- we need more than this. we need growth not just in one corner of our country, nor does one sector. we live in a world where competition for business is growing more intense. i want a sign to go up over the british economy that says "open for business." and this is our propose to do it. corporation tax rates are compared around the world. our current rate of six -- of 28% is looking less and less competitive so we will do

something about it. next year, we will cut corporate tax by 1% to 28% in the pound. the year after that we will cut it again by 1%. and again the year after, and a year the -- and again the year after that. four annual reductions in the rate of corporate debt has the will take it down to just 24%. it will give us the lowest rate of any western economy, one of the lowest rates in the g-20, and the lowest rate this country has ever known. at the same time, we agree with business a long term approach to taxation of foreign profits, the treatment of intellectual property, and the proposals from james dyson on research and development. we will also reduce the small companies tax rate. the previous government was planning to increase this tax to 22% at the same time we should be encouraging small business to grow. we will cut it to 20%. this will benefit some 850,000 companies. and because small businesses are trying to obtain credit, i will extend the enterprise finance

guarantee scheme, which supports access to lending. these changes will benefit at least 2000 small businesses. my right honorable friend the business secretary will be coming forward in the summer with further proposals to expand the availability of credit to make sure the economic recovery is properly financed. there are many small businesses in the tourism industry as well today. to help them, i am reinstating the favorable rules for furnished holidays letting, which our predecessors had planned to repeal. and i can also announce that there will be measures to cancel certain backdated business rates bills. in the current climate with the deficit the size it is, all these reductions in tax must be more than paid for by other changes to business taxation. mr. deputy speaker, we will not go ahead with the poorly targeted tax relief for the video games industry. there will be a small reduction in the rates for capital allowances, which will remain broadly in line with economic

depreciation period for the majority of plant and machinery assets, the rate of allowance will fall from 20% to 18%, while the allowance for longer lived assets will fall from 10% to 8%. in other words, businesses will still receive full tax relief on their qualifying expenditure, but over a longer timeframe. i've also decided to reduce the annual investment allowance to 25,000 pounds a year to ensure support is focused on investment by smaller firms. over 94 percent -- over 95% of businesses will continue to have all of their qualifying plant and machinery expenditure fully covered by this relief. manufacturing as a whole will pay less tax. i've listened to arguments that changing these crucial allowances during the early stage of the economic recovery could be disrupted. so i will delay different -- a direct -- i will delay the reduction in capital and investment allowances to april 2012. this will give businesses the extra early advantage of the tax cuts which start to come in from

next year. mr. deputy speaker, our for the day also mean a great contribution from the banking sector, one that far outweighs any benefit they will receive from the lower tax rates i have just announced. we must remember that this was a crisis that started in the banking sector. the failures of the banks -- and the failures in the banks imposed a huge cost on the rest of society. so i believe is fair and it is right that in future, banks should make a more appropriate contribution which reflects the many risks that they generate. such an approach as far to been recommended by the imf. we are exploring the costs and benefits of a financial activities tax, on profits and remuneration, and we will work -- we will work with international partners to secure agreement. but today the british government takes the initiative about the appropriate risks and rewards in international banking.

from january 2011, we will introduce a bank levy. it will apply to the balance sheets of uk banks and building societies and to the u.k. operations of banks from abroad. there will be deductions for tier one capital and insured retail deposits, and a lower rate for longer maturity funding. small banks with liabilities below a certain level will not be liable for the levy. once fully in place we expect the levy to generate over $2 billion of annual revenues. now there are those who have argued that we should -- we should wait until every country in the g-20 introduces a bank levy. i believe that is the reasonable fair. indeed i can tell the house that the french and german had joined the uk today in committing to introduce a bank balance sheet levy. in a joint statement, our three governments have pledged to ensure our banks make a fair contribution to reflect the risks they pose. mr. deputy speaker, the business i hear from the business is

unequivocal. they want certainty and stability from government so that they start the long process of rebuilding their businesses. and today i am offering them that, off five year plan to reform the corporation tax system with lower rates, simpler rules, and greater certainty. the most fundamental and far- reaching reform of our corporate tax regime in generations. it offers a stable and consistent platform for a private sector recovery. it is a balanced package which will send a clear signal that britain is open for business. it will companies invest, attract foreign investment, and boost growth. above all it will help create jobs. and by increasing the amount of business investment by an additional 13 billion pounds between now and 2016, these reforms will help rebalance the economy away from household debt and government consumption. mr. deputy speaker, we will also take forward our plans to create a green investment bank, bringing forward private investment in green technology

and green technologies. and we also need investment in our digital infrastructure. but the previous government's landline duty is an archaic way of achieving this. i am happy to abolish this new duty before it is even introduced. instead we will support private broadband investment, including rural areas, and part with funding from the digital switch over under-spend within the tv license fee. mr. deputy speaker, over the past decade the british economy has become deeply unbalanced. nowhere are these disparities as marked between the different regions of britain. between 1998 and 2008, for every private sector jobs created in the north and the midlands, 10 were created in london and the south. we need a new approach. when that empowers local leadership, generates local economic growth, and promotes job creations in all parts of the country including wales and scotland. we will publish a white paper on how we intend to deal with these

issues later in the summer, followed by consultation paper on rebalancing the economy of northern ireland. and as a step toward rebalancing our economy, we are announcing support for those regions more dependent on the public sector. first, even when money is short, we will commit to these important regional transport rogers -- the upgrade of the tyne and wear matter, the extension of the manchester metrolink, the redevelopment of birmingham new street station, and improvements to the rail lines between chef flop -- to sheffield and between liverpool and leeds. we will create all large regional growth fund to provide finance for regional capital projects over the next two years. we will announce the details shortly but priority will be given to projects that have the greatest impact on innovation and jobs. third, we will shortly announce a new tax scheme to help create new businesses in those regions where the private sector is not strong enough. for the next three years anyone who sets up a new business

outside london, the southeast, and the eastern region will be exempt from up to 5,000 pound of employer national insurance payments for each of their first 10 employees hired. we now have the scheme up and running by september, but any qualifying new business set up from today will also receive help. and the treasury estimate that some 4000 businesses -- 400,000 businesses will benefit, ensuring all parts of our country contribute to a more balanced and sustainable economic future. mr. deputy speaker, let me now turn to some further decisions we have made on taxation. i am someone who believes in the virtues of lower taxation. but the only sustainable route to lower taxes is by first achieving sound public finances. and the sovereign debt crisis means that we need to reduce the

deficit even more quickly in order to protect our common. and the office for budget responsibility has revealed the size of the structural deficit to be even larger than we feared, $12 billion -- 12 billion pounds larger next year. this budget announces a further fiscal tightening of 40 billion pounds a year by the end of this parliament, over and above the previous government's plans. would cheap -- achieve that additional tightening while maintaining the right "four-to- 1" balance between spending and taxation means that i have to announce further tax rises today. on january 4 next year, the main rate of vat will rise from 17.5% to 20%. the years of debt and spending make this unavoidable. >> order, order. will honorable members calmed down. it is important for all sides the year. but more important, take this

very seriously. show a little more restraint. mr. deputy. >> the years of debt and spend it -- and -- and spending make this unavoidable. this single tax measure will by the end of the parliament generate over 13 billion pounds a year of extra revenues. that is 30 billion pounds we do not have to find from extra spending cuts or income tax rises. i can also give this house a commitment that we will keep everyday essentials such as food and children's clothing, as well as other zero-rated items like newspapers and printed books exempt from b.a.t. over the course of this parliament. in line with the increase in the main rate of vat, the highest -- the higher rate of insurance premium will also raise -- rise from 17.5% to 20%, while the

standard rate will increase from 5% to 6%. let me turn to my decisions on duties. the march budget included substantial increases in these. i can tell the house that my budget today includes no new increases in duties on alcohol, tobacco, or fuel. we will report back in the autumn on the scope for targeting alcohol duty at the products most associated with binge creaking and underage consumption. we will explore changes to the aviation tax system, including switching to a per-plane duty, and consult on major changes. that will help reduce our carbon emissions. we're examining the impact of sharp fluctuations in the price of oil. we will also look at whether or revet for -- or rebate for remote rural areas could work as well. i have one final announcement duties. we have decided to reverse the previous government's plan to increase the duty on cider by 10% above inflation and the reduction will come into effect at the end of this month, and

just in time to celebrate england's progress to the quarter finals, or else to drown their sorrows. that brings me to council tax. at times like this when money is short, we think all parts of government should work hard to keep costs down. and we want to give councils every incentive to do just that. so we will offer a deal to local authorities in england. if you can keep your cost increases low, then we will help you to freeze council tax for one year from next april. that will mean that the average family will be some 35 pounds off better next year and every year thereafter. it will be one less rising bill for families to worry about, and it will drive value for money throughout all levels of government. mr. deputy speaker, one of the most chaotic areas of tax that the new government has inherited from its previous best -- from its previous us -- from its predecessor is the capital gap -- the capital gains tax regime. some of the richest people in

this country have been able to pay less tax than the people who clean for them. that is not fair, and it stems from the avoidance activity that has exploited the wider gap between the rates of capital gains tax and the top rates of income has. these practices are costing other taxpayers over 1 billion pounds a year. it is therefore right the capital gains tax should increase and ordered it helped create a fairer tax system. i have listened carefully to everyone's view. my concern has been to balance the competing demands of fairness, simplicity, and competitiveness, and i believe that my decision gets that balance right. low and middle income savers who pay income tax at the basic rate make up over half of all capital gains taxpayers. they will continue to pay tax on their capital gains at 18% free -- at 80%. from midnight, taxpayers on

higher rates will pay 28% on the capital gains. i have decided that the annual exempt amount for capital gains tax will remain at 10,100 pounds this year, and will continue to rise with inflation in future years. i am aware of our imported is to protect the incentives to succeed in business and to innovate. to promote enterprise, the 10% capital gains tax rate for entrepreneurs, currently applying to the first 2 million pounds of qualifying gains made over a lifetime, will be extended to the first 5 billion pounds of lifetime gains. i ask the treasury to examine what would happen if we have increased the rate much further beyond 28%, and their dynamic analysis shows that this would result in smaller total revenues. i also considered in great detail the options presented to me for introducing tapers or indexation allowances, and concluded that the complexity and administration involved with been self-defeating. the changes i have made means that the capital gains of the majority of taxpayers are

protected. we have a top rate that is in line with our international competitors. we keep the system simple and easy for any taxpayer to understand. we reduce the incentive to convert income to capital gains. it is revealing that the great majority of the almost 1 billion pounds of extra receipts we expect to see as a result of this change will come from let me say something about the.- previous government's policy to reduce pension tax cut -- pension tax relief for people on high incomes, due to come in next year. many businesses are alarmed at the complexity this will introduce and i have listened to those concerned. i must also protect the 3.5 billion pounds of revenues this policy was set to raise from high income people. i will therefore work with industry on alternatives ways of raising the same revenue. let me turn to income tax. a responsible society is one that rewards the efforts of those who choose to work. the income tax system, and in particular the abolition of the

10% rate of income tax, has meant that many people on lower incomes face higher average tax rate. i believe it is important to lift people out of the income tax system and allow them to keep more of their hard-earned money. it's especially important as -- to make progress in this budget where we ask a much of so many. and it demonstrates that this coalition government puts fairness first. in the current system, everyone earning -- everyone under the age of 65 is eligible to a tax- free personal of 600 475 pounds. there thousands of people who had their incomes taken away from them in tax, only half to apply to get back in benefits. this did not reward work. i can increase this personal hours by 1,000 lbs in april. people will be able to earn 7,475 pounds before they have to start paying income ted.

23 million people who are basic rate taxpayers will each gain by up to 170 pounds a year. 880,000 of the lowest income payers will be taken out of tax altogether. higher rate taxpayers will not benefit from this change, and a higher rate income tax threshold will have to remain frozen to 2013-2014. our long-term objective remains to increase the personal loans to 10,000 pounds as set out in the coalition agreement, and we will make real steps toward this throughout the rest of this parliament. i do not disguise from this house that the combined impact of the tax and benefit changes we make today are tough for people. that is unavoidable, given the scale of the debts our country faces and the catastrophe that would ensue if we failed to deal with them.

my priority in putting together this budget has been to make sure that the measures are fair, that all sections of society contribute, but that the richest pay more than the poorest. not just in terms of cash, but as a proportion of income as well. that is far from straightforward when the deficit is this high and when the burden of reduction must rightly fall on government spending. too often when countries undertake maker consolidations of this kind, it is the poorest -- those who had least to do with the cause of the economic misfortunes -- who are hit hardest. perhaps that has been a mistake that our country has made in the past. this coalition government will be different. we are a progressive alliance governing in the national interest. [unintelligible] and that requires us to make two

a final decision. first, we will provide lasting help for pensioners. this earnings link was broken by the last conservative government and never restored through 13 years of the labour government. it meant that each year more and more pensioners were drawn into the means test, punishing those who had done the right thing and saved for their retirement. i can today announce that from april next year, we will real link the basic state pension to earnings. now pensioners can say with confidence. that will also be protected by our new triple lock, which will ggarantee each and every year a rise in the basic pay -- state pension in line with earnings, prices, or 2.5% in crates, whichever is the greater. there will be no more 75 pence increases in the basic state pension.

with this coalition government, pensioners will have the income to live in dignity in requirement. second, we will provide additional support to families in poverty. these are among the most vulnerable people in our society and they need our help. i've decided to increase the child element of the child tax credit by 150 pounds above indexation next year. this is a 2 billion pound a year commitment to low-income families and we make it now even in these difficult times. i can tell that they policies in this budget, taken together, will not increase measured child poverty over the next two years. overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. it is a progressive budget. mr. deputy speaker, today we

take decisive actions to deal with the debts we inherited and confront the greatest economic risk facing our country. we have been tough, but we have also been fair. we of set the course for a balanced budget and falling national debt by the end of this parliament. we have insisted that four pounds of every five needed to reduce our deficit will be found from government spending. we protected capital investment from additional cuts and got to grips with the soaring cost of welfare. we have provided the foundations for economic recovery in all parts of our nation, and given our country some of the most competitive business taxes in the world. we've taken almost a million people out of income tax, 500,000 people out of national insurance, and all of this without increasing child poverty. sadly, with this unavoidable budget, we have had to increase taxes. we have had to pay the bills of past irresponsibility. we have had to relearn the virtue of financial prudence.

but in doing so, we've ensured that the burden is fairly shared. today we get paid the debts of the failed past. we've laid the foundation for more prosperous future. the richest paying the most and the vulnerable protected. that is our approach, prosperity for all -- that is our goal. and i commend this budget to the house. >> order. order, order. order. order. i move the motion called the capital gains tax, and that will take place today and on proceeding day. the remaining voters will be put to the budget debate on monday, june 28.

will the chancellor please read the motion? the question is that the provision will be changing the rate at which the capital gains is charged. for the opposition, harriet harman. >> mr. deputy speaker, the chancellor has delivered his budget. it is his first budget but we have seen it all before. this is a tory budget that will hold back economic growth. [unintelligible] you read the book. it will hold back economic growth and harm vital public services. yes, it is his first budget but it is the same old tory. hitting hardest on those that can least afford it. and breaking their promises. this is true to form ford taurus, but it includes things

that the liberal democrats have always fought against. surely they cannot vote for this. he says his top priority is to cut the deficit. in order to get the deficit down, if you need to seek economic growth of an unemployment down. today's budget is bad for growth and that will make it harder to cut the deficit. the new office of budget responsibility has said in its report today that because of this budget, growth next year will be lower than it would of been under our policies and support for the economy. mr. deputy speaker, they have on growth for next year down, because of on that his budget does.

and mr. beckett -- mr. deputy speaker, he said he was going to tell it straight, but the chancellor has not told straight today today's budget is bad for jobs and that will make it harder to cut the deficit. the obey are -- obr said that the price of his plan is tens of thousands of people out of work. i say to the honorable member, look at the obr report last week and compared on unemployment, compare it with the forecast and the result of this budget. there will be thousands of people out of work. unemployment higher. next year and every year of this parliament. for people affected, this is a

high price to pay, and is the equivalent in scale of putting every working man and woman in the city of coventry out of work. that is the scale of this effect on jobs. and it is counterproductive. it will not -- these jobs will not spontaneously emerge. this budget will hit private sector jobs as well as public sector jobs. get further down by pulling support for businesses. you did not get drawing down by throwing people out of work and on to the dole -- according to the forecast. this reckless budget short- sighted approach will damage our recovery and make it worse. when you do that, if you end up

with more tax rises further down the track. and it is unfair. it is unfair on young people need help to get worked and to get a decent start in life. they scrapped that you -- the future jobs fund report where every young person helped in the work shows is fighting. it is unfair on wigan, whose job sector will suffer. they've snatched away the chance for these jobs. it is unfair on families, caps on the child benefit and the living allowance. cutting short -- sure start maternity grants, cutting back preschool mills, and it is unfair to older people who will have to pay higher vat.

the chancellor tells us that his plans are fair, that the rich will pay most. that is not true. as the prime minister himself said, "it is very regressive, it hits the poorest hardest." it it does, it absolutely -- guyana -- absolute promise you. it was pointed out last week, it penalizes the poor. and it is unfair and cuts in public spending hit those people at those areas where public services and expenditures matter the most. the impact of his changes to benefit will be greatest in poorest areas. we agree that the following must be brought down, but not --

[unintelligible] but not -- but not at who he has chosen to bear the brunt, and the most affected by his austerity, with vacancy the biggest fall an average income -- the area least affected by his austerity policy, least affected by the fall in income, will be checkered. this is not a fair budget. it will increase on fairness for the future. and vat rises -- [unintelligible] >> order. >> it makes this a budget of broken promises.

before the election, the prime minister said that he had no plans to put up vat, and now in his first budget, he has put up vat. during the election campaign, the liberal democrats attacked what they called the tory secrets vat. little did we know, that feed lib dem had their ownvat shelter. that they would vote for it. they try and justify the broken promises saying that things have changed. that things are worse than they realize. but what is this new information obr forecast are better than what we predicted that the time.

lower unemployment than expected, because of our actions. and the government brings up the problems of greece. they are in a different position from us. they're dead is over 115% of their gdp. greece is no alibi for the tory budget. canid this deficit -- can the's economy was boosted by strong investment by their neighboring market, the united states. growth in the u.s. is sluggish. that is why president obama wrote to it-20 -- to the g-20 urging them away from the rush to austerity.

this is a budget based on written history and false excuses. they say there is no alternative, but the truth is this is what they want. this is not driven by economic, but ideology. their commitment to a small state. and the chancellor says he has no alternative, but our plans would have more than half the deficit over four years. this austerity budget is their choice and right now it is exactly the wrong choice. this reckless tory budget would not be possible without the liberal democrats. they denounced early cuts.

now they are cutting them. they denounced vat increases. now they are voting for them. how they -- how could they support everything that they fought against? how could they let down everyone who voted for them which are how could they let the tories exploit them? don't they say that they are just a fig leaf? the deputy prime minister is just the prime minister's figleaf. the liberal democrats have sacrificed everything they ever stood for to rise and ministerial power -- to rise and ministerial power. 20 to limmer democrats -- liberal democrat jobs at a cost of hundreds of thousands of other people.

they used to stand up for people's jobs. now they only stand up for their own. and look at the business sector. the honorable member -- the house's noted the remarkable transformation in the past few weeks. for national treasure from treasury global. this budget has no legitimacy. even if the liberal democrats were to speak out we will. even that they will not fight for fairness, we will. if they will not protect against broken toward policies, we will. mr. speaker, we will support measures that are fair and will help the economy. we will support the increase in capital gains tax. as the chancellor said, it will

help people stop avoiding income tax. we welcome the return of the 50 pence tax rate. we will support this move. although i note the banks have a tax cut to compensate them. we support the increase in public allowance, but the public hit by a rise in vat will fill for change. in the place of a global economic crisis, this is been a difficult time for businesses and families, not just here but all around the world. what this country needed was a budget to support economic growth, protect jobs, and cut the deficit fairly. what we thought was a reckless budget that pulls the rug out from under the economy, particularly the tories who do

not care and are not as big. the liberal democrats are wringing their hands, and well they might, but that is not good enough. they should think about their constituents who will suffer if this budget goes again. the liberal democrats should think again. but we will vote against it. >> now, supreme court nominee elena kagan on the lingering effect of the glass ceiling. >> i think you would like to see women at the top of every sphere. if you looked it general counsels for the 14 -- for -- that top companies, or other organizations, in each of those places you've felt that there were equal opportunity for women to rise to the top of them. i don't think we're there yet.

i think we're pretty close in on profits and government. the problems are much more with respect to the business community and law firms. and i think that they would say the same, that they know that this is a significant problem in their ranks, that women are not staying in law firms or in businesses, and there seems to be a real glass ceiling. >> starting monday, what's the confirmation hearings for supreme court nominee elena kagan live on c-span3, c-span radio, and that c-span.org. c rea errors every night on c- span2. to learn more about the nation's highest court, get our book "the supreme court," with conversations with justices active and retired. available in hardcover and as an e-book. >> let me say to the american people, this is a change in personnel but not a change in policy.

general petreaus fully participated in our review last fall. he both supported and helped design the strategy that we have in place. >> learn more about the president's choice to head u.s. forces in afghanistan. general david petreaus has been on c-span more than 40 times. watches appearances at hearings, briefings, and other events on one any time at the c-span video library. it is washington your way. >> c-span is now available and over 100 million homes, bring you directly to public affairs, politics, history, and nonfiction goes, all the public service. created by america's cable companies. >> now house oversight hearing on alleged incidents of corruption on the military supply chain in afghanistan. we hear about a report from the subcommittee saying afghan war lords and insurgents are exploiting protection money from contractors supplying u.s.

troops. john tierney of massachusetts chaired this 2.5 hour hearing. >> i ask unanimous consent that the hearing record be open for five business days so that all members of the subcommittee can offer their statements for the record. without objection, so ordered. and a constitutional deeocracy, a charge -- congress is charged with overseeing the dax -- the executive branch executes its duties accorded law. this country has invested this subcommittee with a cleer mandate to redoubt wait, fraud, and abuse wherever we may find it. real oversight is a powerful tool for transparency and accountability, not for political grandstanding. today's report by the majority

staff represents constructive oversight. after six months, 31 witnesses, 25,000 documents, hundreds of hours of work, the report provides the american people significant insight into how the department of defense is manning the supply chain for the troops in afghanistan. an investigation is akin to a puzzle. we have put the." -- pieces on the table, put together the edges, and fill them enough detail to see what the pitcher would look like, but there portions to be completed. important questions remain. there's a systematic failure of management and oversight of contractors along the afghan supply chain. in the past eight years, the united states had placed enormous burden on our brave men and women in uniform. the military has been asked to

fight to grueling complex in the most challenging conditions available. it is simply staggering. to absorb the strain of these burdens, the department of defense has increasingly looked at civilian contractors. in some cases, using contractors to active military personnel makes sense. what was initially cost- effective expediency has become institutional clients and a dangerous shortcut. as the congressional office put it, the recent increase in the size and scope of contractor support has been unprecedented in united states history. in afghanistan today, we have roughly 90,000 troops by reportedly used 110,000 contractors. as the department of defense has increased its reliance on contractors, it it has not increased its ability and expertise to manage and oversee those contractors. as the defense contract management agency, the civilian

work force fell by 60% between 1990 and 2006. with insufficient management oversight, it is a reprobate for disaster. in the case before, we have just such a disaster. the department of defense outsourced almost operational -- all operational support for the supply chain that the men and women need to do thhir jobs. bylaws and regulations mandating strict oversight of arms private security guards, this management was outsourced to other contractors. contractors supervising contractors, in charge of procurement, management, and oversight of small armies of private security contractor. in circuit -- sending debt subcontracted security to the

most dangerous places on north of carrying critical supplies for our troops. many in the department of defense apparently took comfort in these arrangements. the responsibility for security and reliance on the contractors and subcontractors, the prevailing attitude being that as long as the subcontractors rich their destination, do not rock the vote. but problems arose, and they were reminded of follow the terms of the contras. many contractors recognize that they could not adequately procurer, management, or oversee mass scale security services in afghanistan and they raised red flags. they told the military that they were being exported and making massive protection payments for safe passage and possibly "funding the insurgency." these extraordinary warnings appeared to a fallen on deaf ears. the consistently responded that the company just needed to get

the truck to the destination. contractors raise serious concerns about extortion payments funding war lords. within two days of the contract performance beginning. here we are 14 months later, and nothing has changed. nothing has changed. the benefits of outsourcing the supply chain are clear. the united states troops are put in harm's way and they can focus their energies on higher priority missions. this report shows as a way to contract enough to supply chain. in short, this contract appears to have fueled warlord is some, extortion, corruption, and maybe even funded the enemy. the united states taxpayer dollars are feeding and protection -- feeding a protection racket in afghanistan that would make on a soprano proud. his undermined the united states mission. in january this year, on major

in afghanistan wrote a public report saying that the united states is largely blind, deaf, and dumb when it comes to understanding local politics, power dynamics, and economic structures within afghanistan. i'll ask that the united states is also largely blond, sometimes willfully so, to the intrusting of its forces to contract and development firm. we must be aware of how this can affect such a sensitive environment. before a close, i will address our recurring source of this investigation. some people say this is the way that things are done in afghanistan. others compare it to the anbar awakening in iraq. there, general petreaus and others strategically coopted insurgents.

this is no anbar awakening. the department of defense wants to co of warlords with u.s. taxpayer dollars, military commanders in the field need to take responsibility for those relationships in order to ensure absolute accountability. this oversight committee is charged by congress with the stewardship of american taxpayer dollars. we will root out waste, fraud, and abuse where we find it. with this report in hand, we intend to hold the department of defense accountable to the american people. with that, i'd defer to mr. flake for his opening remarks. >> i think the chairman for holding this hearing. i think the hearing for this very thorough, and lightning and i thank you for initiating this room -- and very sobering investigation. the chairman as artists summarize the report so i will not go into detail. let me make a couple of observations.

the counterinsurgency plan we are employing in afghanistan is dependent on the central government kick kabul that will extend its risk beyond cobble -- kabul. the counter insurgency plan we are employing is dependent on our ability -- the ability of our military and our nato partners to provide security to the afghan citizenry. this report presents strong evidence that this is not occurring. security in any meaningful sense does not extend beyond the security gates of our military bases. i hope that the department of dense takes the recommendations contained in this report seriously. and sees that they are implemented in their own lives -- and the phone list. it presents for irrefutable evidence that our overall strategy in afghanistan needs to

be examined and overall. it is not something that can be salvaged with time and troop levels. i look forward to hearing the witnesses. >> will not receive terror mounted -- testimony from the first panel will force. i will introduce all three. william phillips, the principal military deputy to the assistant secretary of the army for logistics, acquisition, and technology, as well as career management. he served previously as the commanding general of the joint contract in command in iraq and afghanistan, and the program executive officer reminisce. he held a b.s. from middle tennessee state university. and a masters -- the masters of personnel management from toward state. he was named the army acquisition commander of the year. mr. gary motsek is the deputy undersecretary of defense for

program support. his principal adviser to the office of the secretary of defense leadership on policy and program support for the geographic area command. he served as the ship 83 for support operation, the head deputy assistant of staff, among other positions within the united states army and native. mr. motsek received a b.s. in informal engineering from syracuse university, an ms in management from george strait university, and a level 3 accreditation from another university. john nicholson is responsible synchronizing the military action since of the services and combatant and demand for the region. is served in afghanistan at the deputy commanding general for regional command south, as part of the national a sergey -- security force for the national military command center. john nicholson has of degree from the united states military

academy and georgetown university, a master's in military arts and sciences in the school for advanced military studies, and an m.a. from national defense university. on the back all of you for making yourself available today and for sharing your substantial expertise. it the policy of this committee to share it -- swear in the witnesses before you testified. i ask you to stand and raise your right hand. we solemnly swear or affirm to tell the truth, the whole truth, and nothing but the truth? the record will please reflect that all the witnesses answered in the affirmative. i think that you gentlemen know that your full written statement will be entered into the record by previous agreement with the committee. i would ask you to summarize, it could, within as close to five minutes as possible to determine that from the light before you went -- when it is green your ago, when it is ever, you have about a minute left, and when it is red, please wind up and bring it to a conclusion so that we have time for people as question. john phillips, if you would. john phillips, if you would.