91Èȱ¬

A lot of heat and very little light was generated by exchange about rival statistics measuring the job cuts resulting from the government's budget.

Harriet Harman deployed that between 500,000 and 600,000 jobs could go in the public sector and between 600,000 and 700,000 could disappear in the private sector by 2015.

David Cameron responded by flourishing a newly published Office of Budget Responsibility forecast to claim that his government's proposed public-sector pay freeze would save public sector jobs compared with Labour's plans.

So, what's the truth?

The OBR and the leaked Treasury figures tell roughly the same story about public sector job losses - the OBR forecasts 490,000 job losses by 2015 and 610,000 by the following year.

The OBR forecasts do show - as David Cameron claimed - that public-sector job losses in the next two years would be 150,000 higher under Labour but this comparison rests on the assumption that a newly elected Labour government would not have announced a tougher pay restraint policy than it had originally planned. That's doubtful.

The OBR forecast predicts net growth in private sector employment - of around 1.3 million. It does not show the job losses that will result from the loss of government contracts - which is, I'm told, what's shown on the Guardian's leaked forecast.
Of course, all these are mere forecasts.

The government believes - or should that read "hopes" - that "rebalancing the economy" will allow private sector growth to more than replace the shrinking public sector.

The true political significance of today was, I suspect, that David Cameron predicted that unemployment would fall in this Parliament. If he's right, these forecasts won't matter much. If he's wrong, it's a prediction he will regret ever having made.

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For the self-proclaimed new kid on the block, the test of his first summit was not going to be the wording of but the impression he made.

On that test, David Cameron flew home from Toronto last night feeling pretty satisfied.

The prime minister both impressed and slightly intimidated his fellow G8 leaders when it was revealed that he'd not just gone for a morning jog at their Canadian retreat but had then dived into the lake for a spontaneous swim.

On the summit family photocall, one leader after another can be seen asking him to point out where he'd taken the plunge. Clearly feeling his masculinity threatened, Silvio Berlusconi circulated a photo of himself posing in trunks - taken, it should be said, a few decades ago.

The image which gave the new boy the most satisfaction though was that of him aboard Marine One - President Obama's official helicopter - travelling from the G8 retreat to the G20 in downtown Toronto. While other leaders had to drive the over-140 miles, the prime minister's aides were boasting that the special relationship "had taken off again".

Back on the ground, the two men swapped beers - the outcome of a drawn bet about whose team would beat the other in the World Cup. They also swapped warm words about how David and Barack would work together.

And work together they must. Both men sense the mounting political pressure of the rapidly escalating death toll for their forces in Afghanistan and the steadily decreasing public support for their continued presence there.

On the economy there can be little doubt that the president felt more comfortable with David Cameron's predecessor than with him. If Gordon Brown had been at this G20 summit, he and Barack Obama would have stood together to warn of the risks of cutting support for the economy too fast.

As it is though, the president chose to help his new ally, praising him in front of other leaders for taking the "necessary courageous action" to tackle Britain's budget deficit.

The same officials who worked on Gordon Brown's summiteering now work with David Cameron. They've been struck by their new boss's cool, calm confidence on the world stage BUT they're quick to point out that he's benefited from the guilt felt at the White House about how they mishandled the first meeting between Brown and Obama.

What they've told the prime minister is that this may be as good as it gets.

The image of this summit that many will see at their breakfast tables this morning is of David Cameron with his head in his hands... when he watched England trounced 4 -1 alongside Germany's Angela Merkel.

If things do go wrong for him in Afghanistan or the economy, that image may well be used to sum up the fate of a hapless British leader on the world stage rather than to show the global new boy trying to enjoy the football at his first summit.

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This is not a change of strategy says Downing Street.

This is not a new timetable, they say.

However, the prime minister's declaration that he wants British troops home by the next election does highlight the fact that his mind is on how and when to bring British forces out of Afghanistan.

David Cameron has repeatedly said that he does not view Britain's military commitment as open-ended.

In November last year he talked about imposing a "tight internal timetable". In April, he said that Britain would put everything into the fight "this year and next year" and said that "we've been there already for eight or nine years. That's already a long time. We can't be there for another eight or nine years".

He went on: "It's got to be in the next parliament that these troops really start coming home - as soon as possible but based on success, not on an artificial timetable."

On all those occasions, though, David Cameron was not prime minister. That's why his comments on Sky News that "we can't be there for another five years" are significant.

Earlier today he discussed Afghanistan with the host of this year's G8, Canada's Prime Minister Stephen Harper. In March 2008, Canada's parliament voted to pull the troops out of the war in 2011 (although members of its Commons Special Committee on the Canadian Mission in Afghanistan have spoken of maintaining a role after that date).

Tomorrow he will lead the G8's discussion of Afghanistan and hold a bilateral meeting with President Obama, who has committed to troop withdrawals from next year.

On his mind, and theirs, is the fact that June has been the bloodiest month for Nato forces in Afghanistan since the mission began in 2001, with the coalition death toll standing at 80.

What's more, he and they know that we are entering fighting season and that, as the prime minister said onboard the Ark Royal yesterday, we need to brace ourselves for a "difficult summer".

The prime minister's message to the military is that this is the year the generals get to show they can make progress.

What today's remarks suggest is that he may be thinking already about what to do if they don't make that progress.

PS: In another interview - with Canadian broadcasters CBC - the prime minister spells out his thinking on Afghanistan in more detail :

Q: The three major partners in this, the United States, Great Britain and Canada - the US and Canada both set dates already. The US saying they're going to start to withdraw in July of next year, Canada saying they're out as of the end of next year. Are you looking at a date?

A: I haven't named a date in that way, but obviously all of us, as I've said many times, we don't want to be in Afghanistan for a day longer than we have to be. As soon as the Afghans can take control of their own security then we shall be bringing our troops back home.

We shall go on having a very long and deep relationship with both Afghanistan and Pakistan. We've got to convince those countries that we're in for the long haul with aid, with diplomacy, with trade, with assistance. We don't want those countries to go back to being the bad lands for terrorist training camps, but do I want to get the troops out? Yes, of course I do.

Q: Why do you hesitate on a date when others seem to be rushing towards one?

A: Look, I accept the timeframes that have been set out by President Obama and I'm working very closely with him. A proper review of how we're doing towards the end of this year, the ambition that we should be starting to transition districts and then provinces of Afghanistan over to lead Afghan control by the end of this year and into next year and then, yes, the ambition to start bringing some troops home.

But I want this to be done, as far as possible, on the basis of success rather than lines in the sand and dates, but am I pushing very hard to get everything done so this can happen? Yes, of course, and I think there are basically three elements: it's making sure the surge works and the counter-insurgency is going full steam ahead. It's about training up the Afghan army and police, and then, vitally, it's about the political settlement that we need to make with those elements of the Taliban that want to lay down their weapons.

Get those three things right and the timetables are realistic.

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Deerhurst, Canada: Reassuring and yet worrying news emerges from the G8 leaders' retreat.

The prime minister has just told me that if - surely he means when - England score on Sunday morning, he will not run around the room with an England shirt pulled over his head. This may be a wise concession to make since the plan is for David Cameron and Germany's Chancellor Merkel to slip out of what will, by then, be the G20 summit in order to watch the second half of the match.

The PM told my ITV News colleague Tom Bradby that he would not wrestle Ms Merkel to the floor in the event of penalties.

Diplomats may breathe a sigh of relief but true footie fans may be puzzled as to how our nation's leader can even contemplate watching a crunch match with "the enemy".

PS: Perhaps more significantly, the PM insisted that there was no divide between the UK and the US on the need to tackle our deficit. Both countries, he said, wanted to deal with global imbalances so that countries like China and Germany support global growth.

Sky's Adam Boulton asked Mr Cameron if he wanted see British troops in Afghanistan home before the election. "I want that to happen," he replied. His officials insist that this is not a new timetable and that this was implied by his statements during the election about beginning to bring troops home in the next year, as President Obama has said.

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Canada: "Is that it?"

That, I'm told, sums up the prime minister's reaction on seeing the draft communiques to be issued by world leaders at the end of this weekend's G8 and G20 summits.

Gordon Brown used to react in much the same way. But there the similarity ends.

On the plane to a summit Brown would insist that world leaders had to do better and would soon be surrounded by a pile of briefing papers covered in his barely-legible scrawl in black felt tip.

Officials would spend the entire journey working on Gordon's latest plan to save the world. He would then come to the back of the plane to tell journalists of the pressing need to reform of the UN, IMF, G8 and G20 and any other global institutions he could think of.

The hacks would listen, engage a little before realising that this would be of almost no interest to their news desks or that they'd written this before and that reform had proved a tad elusive.

So; they/we would ask instead about his latest political crisis. The PM would get increasingly grumpy before heading back to first class to despair at the superficiality of those he'd been talking to.

David Cameron, in comparison, read his briefings, discussed his strategy for his first-ever summit and first-ever meetings with a host of global leaders, told travelling journalists that summits too often fail to live up to the hype, chewed the fat on other subjects before telling aides he wanted some sleep before a busy day ahead.

Thus, the self-proclaimed "new kid on the block" has come with the limited aim of arriving at a summit rested, getting to know his fellow leaders and urging them to take practical steps rather indulging in windy rhetoric.

As I write this, I can hear Gordon Brown telling the story of a London summit in the 1930s which failed to avert the Great Depression. Thousands of miles away, I can sense his brooding frustration with the failure of world leaders to do enough to avert another crisis.

History will be the judge of who was right.

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The prime minister has admitted that the pensions of existing public-sector workers will be cut, with employees expected to pay more and get less on retirement than they expected.

David Cameron's concession came in response to a question posed by Brett O'Reilly, who works in a further education college in Stourbridge, in a 91Èȱ¬ News programme, Britain's economy: Cameron and Clegg Face the Audience.

O'Reilly asked the prime minister whether "existing pensions will stand? On the current terms?" He was assured that the rights he accrued so far would not be touched.

However, when I asked whether "contributions may be higher, you may get less back?" Mr Cameron replied "Yeah... what's happened in the private sector... many people's pensions have changed - no longer final salary schemes or having to put more money in... it's those things." (You can see a full transcript of the exchange below.)

David Cameron said that he wanted to start by limiting the pensions of those on the highest salaries whose pensions, he said, could be worth £60,000-£70,000 a year.

Earlier this week the government announced that the former Labour cabinet minister John Hutton would be investigating the future of public-sector pensions which as "gold-plated".

In the programme, the prime minister was also confronted by Denise, a fire-fighter from Edinburgh, who forced him to admit that the public-sector pay freeze actually meant that her pay was being cut once you took inflation into account.

David Cameron and Nick Clegg also faced questions about the impact of VAT on the poor, why they hadn't raised more from the bankers, cuts to benefits and much besides.

Seeing them finish each other's sentences may not be as much fun as watching England but it's not far off it.

You can see Britain's economy: Cameron and Clegg Face the Audience in full on the 91Èȱ¬ News Channel at 7pm and again on 91Èȱ¬2 at 11.25pm

Full transcript of the exchange on public-sector pensions:

O'Reilly: "Does that mean that existing pensions will stand? On the current terms?"

Cameron: "What it means is the rights you have accrued so far of course, no-one is going to touch those. But it does mean for the future, we've got to make sure that pensions are affordable and yes you're absolutely right..."

Robinson (interrupts): "Let's just be clear what that means, let's be clear what that means."

O'Reilly: "So our pensions could essentially in the long term go down on what we've planned for?"

Cameron: For the future there may be changes to pension arrangements affecting existing employees, but the rights they've accrued so far no-one would touch those.

Robinson: Just so we're clear, if we may be, people get a prediction don't they, of what they're going to get on their pension if they carry on contributing as they are now? I think what you're saying to Brett and everybody else is... what you've so far got is safe but those contributions for the rest of his working life could be higher and you might get less back...is that right?"

Cameron: "Yeah... what's happened in private sector is many people's pensions have changed. There are no longer final salary schemes or they're having to put more money in... it's those things to make sure they're affordable. We want to have good pensions in the public sector."

Clegg: "Also in the public sector we can avoid what's happened in the private sector where those changes have been really abrupt. We can plan these things over a longer period of time so we've got plenty of warning."

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If you don't like the sound of cutting spending in the 91Èȱ¬ Office or the Department for Transport by a quarter how about bigger cuts to welfare spending? That's the choice posed by the chancellor this morning.

It's a choice which his critics will reject. They will point out that the decision to add £49 billion to Labour's deficit reduction plan was not "unavoidable" - George Osborne could have done less.

They'll point out that the mix - £32bn spending cuts and £8bn tax rises was not "unavoidable". It would have been possible to tax more and cut less. And they'll point out that the choice of a rise in VAT was not "unavoidable".

The coalition racked up bills by cutting Labour's planned National Insurance rise, increasing personal tax allowances, protecting the budgets for health and international development and limiting the rise in capital gains tax and the banks levy.

However, it is the coalition's aim to get people engaged with making choices rather than debating their strategy. That is why, I assume, they have agreed that the prime minister and his deputy will face questioning by an audience together this afternoon.

Feel free to suggest anything you think I should ask them.

You can watch edited highlights of "Britain's economy - Cameron & Clegg Face the Audience" on tonight's Six and Ten O'Clock news or the whole half hour at 7pm on the 91Èȱ¬ News Channel or 11.25pm on 91Èȱ¬2.

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is what George Osborne meant when he spoke of "the age of austerity".

A VAT rise, benefits cuts for all and most controversially for the disabled, a public-sector pay freeze and cuts in most government department's budgets of about a quarter. A package which raises £40bn more in tax rises and spending cuts than planned by the last government.

Off-setting the pain for some - a rise in the personal tax allowance, re-linking the state pension to earnings and a £2bn boost in tax credits for the poorest families. All groups will, however, be worse off.

This is a massive gamble economically and politically.

Will the economic benefit of reassuring the markets and lower interest rates be offset by a slowdown in economic growth or, worse still, a double-dip recession ?

Will the public accept the chancellor's insistence that this package was "unavoidable" and "fair"?

Can the coalition survive the battering which it - and, in particular, the Liberal Democrats - are sure now to suffer?

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and, to make his point, he is flanked not by one but by two Liberal Democrats - Nick Clegg and Danny Alexander.

In fact, the prime minister is sitting next to him - but on the main shot used by the Commons, the Tory leader appears hidden.

The image of spending and benefit cuts being unveiled and VAT hiked by a Tory chancellor with two Lib Dems nodding in agreement will define politics for a long time to come.

Update 1258: Before the election, the Tories promised that 80% of the work of cutting the deficit would come from cutting spending and 20% from raising taxes.

In fact, the chancellor has announced that the figures are 77% to 23%.

That 3% is the impact of the coalition.

Update 1309: George Osborne has announced £11bn-worth of welfare cuts, affecting every person who receives benefits.

Cuts to child tax credits, to child benefit, which is frozen for three years and to housing benefit were anticipated; Mr Osborne has also announced plans to cut disability living allowance and to raise benefits, in line not with retail prices (the RPI) but, instead, with a lower figure, the so-called consumer prices index (CPI), saving him £6bn.

Update 1322: He said during the election that his plans didn't require it.

Today, though, with Nick Clegg - the man who warned that Mr Osborne's plans were a "Tory tax bombshell" - at his side, George Osborne announced a 2.5% increase in VAT.

I couldn't help noticing that when the chancellor declared that "the years of debt and spending make this unavoidable", his Lib Dem allies were no longer nodding or smiling but looking at their feet.

Update 1336: So this chancellor, like his predecessors, had a rabbit to remove from his Budget hat.

He ended his speech with a pledge to link pensions to earnings - or prices or by 2.5%, whichever is higher - and a £2bn supplement to tax credits for low-income families.

That, Lib Dems will no doubt point out, was the cost and, perhaps, the benefit of the coalition (see update at 1258 above).

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Eye-watering.

That's the best way to sum up the impact of the secrets in .

I now understand that VAT will go up and that benefits will be cut. That's in addition to a squeeze on public-sector pay and spending cuts to come.

The image of the day so far, though, is that of Michael Gove - a close ally of the prime minister - leaving the cabinet and pausing when asked on camera about the Budget. He knitted his brow then appeared to bite his lip before describing it as "difficult".

For the first time, senior Conservatives are having to confront what their talk of "an age of austerity" really means.

What's more, Lib Dems are discovering the price of their warnings of Greek-style chaos if the deficit is not dealt with quickly.

In just a few minutes, the coalition's honeymoon will end and real politics will resume.

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One of the thorniest questions facing the coalition before this Budget has been whether to raise VAT. The Tories were keen to avoid it, aware that Labour will say "I told you so" and will claim that it is an unfair and regressive tax which hits the poorest - some pensioners and those living on benefits - who will not be helped by income tax cuts. Ironically, it was Vince Cable who when shadow chancellor argued in favour of raising taxes on expenditure (and housing - remember the mansion tax?) and cuts in income tax.

So, what were the arguments inside the coalition for and against a VAT rise?

For:
• A VAT rise produces a lot of cash fast
• Treasury officials like it - they advised Alistair Darling to put it up (and during the election he refused to rule it out)
• It gives you revenue to cut other taxes - just as Margaret Thatcher's first Chancellor, Geoffrey Howe did
• Vince Cable's in favour
• The coalition can claim that things were worse than expected when they looked at the books so they had no choice

Against:
• Labour will say "you were warned. The Tories always increase VAT"
• David Cameron said the Tories' plans did not require an increase in VAT
• Nick Clegg said the Lib Dems' plans did not require an increase in VAT
• Nick Clegg appeared in front of an election poster warning of a Tory VAT "bombshell"
• Some on the right - such as the Taxpayers' Alliance - are now campaigning against a rise

For weeks, my hunch was that the Tories would do all they could to avoid a rise in VAT but expensive promises to give poorer workers an income tax cut, plans to ameliorate today's bitter medicine with schemes designed to protect the elderly, poor and children and moves to cut corporation tax and cut the rise in National Insurance for businesses may mean they simply need the money.

If so, they are likely to defer the rise until next year in the hope of stimulating consumer demand whilst the recovery is still weak.

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Some good news has emerged from the Treasury tonight. The Budget will take 880,000 people out of the tax system and give basic rate taxpayers a tax cut of £200 per year.

The bad news comes tomorrow when it will become clear that overall people in all income groups will pay more as a result of other tax rises, spending and benefit cuts and limits to public sector pay and pensions.

"Tough but fair" is how the chancellor will describe the package of measures he unveils to cut Britain's budget deficit. He will publish figures designed to show that the rich will pay more than the poor. Normally it's been left to our old friends at the Institute of Fiscal Studies to produce that sort of distributional analysis. The Treasury's figures cannot and will not include the effects of cuts in public services on different income groups since the Budget will only announce the headline spending totals for the next four years with the detail of what exactly is to be cut not decided until the Spending Review in October.

Tomorrow's tax cut will come in the form of an £1,000 increase in the amount that anyone can earn before paying tax - taking the annual tax allowance for basic rate tax payers to £7,475. The benefit will be clawed back from top-rate taxpayers. The chancellor must find £3.5bn to pay for this measure in addition to the billions needed to cut the deficit.

The proposal to cut income tax allowances was first made by the Liberal Democrats and was adopted by the coalition government instead of the Conservatives proposal to stop Labour's planned rise in National Insurance for anyone earning over £20,000 a year.

Labour have always insisted that any tax cut was irresponsible and could not be afforded.

If the chancellor increases VAT in his Budget - which is far from certain - the opposition will argue that it will hit the poorest people in our society the hardest - pensioners, the unemployed and those who do not pay income tax at all.

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"It will be a difficult budget... it will be controversial... one of the hardest things we will ever have to do."

So says Nick Clegg in an e-mail to his party members on the eve of the Budget.

His only words of comfort to them are to insist that "the alternative is worse - rising debts, higher interest rates, less growth and fewer opportunities" and to assure them that "we have taken the difficult decisions with care and with fairness at their heart."

Tuesday will, in many ways, be a bigger test for Nick Clegg and the Liberal Democrats than it is for George Osborne and the Conservatives. For the first time, Lib Dem members will learn the true extent of the pain to come, the limits on their ability to protest about it and the unpopularity that comes with being in government.

The Treasury is making clear that both Danny Alexander as chief secretary to the Treasury and Nick Clegg as deputy prime minister were consulted about all the key measures in the chancellor's speech - a level of consultation unheard of when Gordon brown was chancellor. I'm told that Vince Cable was also able to discuss the broad Budget straetgy with George Osborne whilst other Liberal Democrats were kept informed by their leader.

The Conservatives concede that this Budget will be more progressive than it might have been thanks to pressure from the Lib Dems. In particular, they have argued successfully for a bigger increase in income tax allowances than Team Osborne originally wanted.
Even more striking then that, in Nick Clegg's own words, this will be "one of the hardest things we will ever have to do".

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Tony Blair had his "Big Tent". Gordon Brown his "GOATs". Now George Osborne has shown that he sees the value of attracting talent from the opposition to work for the government.

John Hutton, former Labour Secretary of State for Defence, Work and Pensions and Trade and Industry, is to write a report for the coalition on how to cut the cost of pensions for public sector workers. Last week the Office for Budget Responsibility produced figures showing that that cost could double in just five years.

Hutton was, I'm told, completely taken aback when called by George Osborne but soon became convinced that the chancellor was serious about trying to fix the problem and not engaged in a party political fix. He's well aware that this is an argument which may not persuade his former Cabinet colleagues. Indeed,

Osborne and Hutton don't know each other well but the man will have come highly recommended by David - now Lord - Freud - the man recruited by Hutton to advise on how to reform welfare who was recruited by Osborne when Gordon Brown made it clear that he would block the ideas. Ideas which, incidentally, Brown later adopted after the Tories had declared that only they could be trusted to be radical on welfare.

Hutton knows the value of tough independent reports to governments that want to get things done. He didn't only commission Freud. He fought for the Turner Report into pensions. He sponsored the Hooper Report into privatising and modernising Royal Mail and Bernard Grey's Report into how to cut the cost of defence procurement. Each shaped a new consensus into how to tackle a thorny issue.

Now the Tories want him to do the same for them.

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Brussels: "History reminds us it is usually in times of crisis that we can make progress in the European project". So says the man who David Cameron had breakfast with this morning in Brussels. The President of the European Commission, José Manuel Barroso, speaks for many here.

His words have already fuelled the suspicions of many Eurosceptics that, once again, predictions that "the era of institutional change in the EU is over" will turn out to be worthless. They hear the calls from Germany's Chancellor Merkel for treaty changes to allow the EU to punish countries which build up big deficits and cry "I told you so". They see another British prime minister speaking warmly about the need for Britain to be "active and engaged" in Europe and they sense betrayal.

The Eurosceptic analysis is simple. The federalists use every crisis as an opportunity to further their project so we must do the same. Thus, and the Eurosceptic pressure group - - are calling on the prime minister this morning to offer help to Mrs Merkel to get the new powers she wants but, in return to demand the repatriation of powers to Britain.

Not so long ago they might have relied on David Cameron and William Hague to agree. Not any more.

The Eurosceptic Tory leader and his even more Eurosceptic predecessor are on a charm offensive in Europe. Early prime ministerial visits to Paris and Berlin were followed up by the extraordinary Hague/Clegg Europhobe/Europhile double act which played to enthusiastic audiences in Berlin and Madrid. Today we will, I suspect, see much hand-pumping and back-slapping and even bear-hugging on the new boy's first day at Euro school.

Every smile will send a shiver down the back of those fearing another Euro "sell-out". They will curse the coalition and blame Nick Clegg for neutralising the hopes many had of a genuinely Eurosceptic government. They will, though, be ignoring the fact that the Tories sued for peace with the EU long before the election when William Hague gave a speech much read and much admired in the Chancelleries of Europe which made clear that he was not planning to pick a fight with them.

The prime minister and his foreign secretary know that there will be Euro battles to come - to ensure that new rules for the eurozone are not applied to those outside it, to limit EU regulation of the banking system which could strangle the City of London and, crucially, next year's battle over reform of the Common Agricultural Policy and the EU budget.

They know that if they are to win any of those battles it will not help if they are seen to have picked a fight over repatriating powers in the middle of a European economic crisis.

All at today's summit agree that the eurozone crisis has the potential to be as serious as the banking crisis of 2008.

All fear that Spain may soon catch the Greek disease - with disastrous consequences for those banks, not least our own, who hold Spanish debt.

All know that if that were to occur the contagion would soon spread to other countries, bank lending could seize up again and that oft-talked of "double dip recession" would surely follow.

The British prime minister is not about to use his first or, indeed, second or third EU summit to say "Never mind the crisis, I want to talk about returning powers to Britain over social policy and fishing rights".

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It is not a report he commissioned.

He regrets the amount of time and money spent on it.

It has the potential to re-open old wounds and to open new ones in Northern Ireland at a time when anxieties about the resumption of violence remain.

The Saville Report focuses on a tragedy which happened when David Cameron was just five years old.

Even Tony Blair's chief of staff has confessed that he had second thoughts days after the decision to order it was taken.

Yet it fell to this prime minister to negotiate the challenge of presenting the report into Bloody Sunday to the Commons and the country as a whole.

David Cameron did so powerfully, making no attempt to "soften" the verdict - there would, he said, be no point in doing so after a report that left "no doubt" and contained "no ambiguities". He declared that he and the government were "deeply sorry". He insisted that "you do not defend the army by defending the indefensible".

What gave his statement power though was the fact that it began with a personal declaration that as someone "deeply patriotic I never want to believe anything bad about our country. I never want to call into question the behaviour of our soldiers and our Army who I believe to be the finest in the world."

I expected some MPs to react by demanding that there be enquiries into the Bloody Mondays, Tuesdays, Wednesdays and so on, caused by the IRA.

No-one did so, although the DUP's Willie McCrea asked David Cameron "how do we get a closure, justice and get the truth?" for the three members of his own family and many other people who were brutally murdered.

It is a question for which there is no real answer but in Westminster this felt like a page being turned.

The test, though, will come not here but in Londonderry/Derry and in Belfast and in the minds of a generation of young men for whom Bloody Sunday and what followed it are stories about the past which can either provoke further violence or convince them to declare "never again".

Update 17:55: More anger was expressed in the Lords than the Commons.

Lord (Ken) Maginnis accused the Saville inquiry and the government of being "one-eyed" in its emphasis on just 13 of the 180 violent deaths in the province in the preceding year, saying that "The 13 deaths are regrettable, but no more regrettable than the other 167, the other 94% of the people who died that year."

Lord Morrow, a DUP member of the Northern Ireland Assembly, said there was a danger of creating "a hierarchy of victims" and warning that "the Saville report today has the potential to set Northern Ireland back 30 years rather than take it forward."

And the former Conservative armed forces minister, Lord (Archie) Hamilton of Epsom, said that since the time of Bloody Sunday, "I think people will find it very difficult to understand if that same threat of prosecution is not withdrawn from our troops for offences that, let's face it, may have been committed 40 years ago or the best part of it."

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• - What's this?

So you knew tax rises, spending cuts, pay freezes and benefit cuts were on their way. Stand by for cuts in pensions for public-sector workers.

The OBR report estimates that the cost of public-sector pensions will increase in real terms by 20% every year - that's equivalent to the cost doubling over five years.

Nick Clegg describes this as unfair and unaffordable.

I'm told that we'll hear soon the name of the person chosen to chair an independent review of public-sector pensions.

Ministers are clearly preparing the way for higher pension contributions and possibly, in the longer term, scheme closures.

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So: that's clear, then.

A provides "damning evidence that the mess the previous government left behind is even bigger than we thought". Or, on the other hand, the very same stats "show that borrowing will be less than... forecast".

That was the reaction of first the chancellor and then his predecessor to today's first report by the newly-established Office for Budget Responsibility.

On the one hand, it showed that borrowing is a little less than the last government forecast, allowing Labour to insist there's no need for bigger spending cuts or tax rises in next week's emergency Budget.

On the other, it showed that growth is going to be lower than forecast and, as a result, the structural deficit - the borrowing that doesn't go away simply as a result of economic growth - is going to be bigger. So, there is a need for those cuts and tax rises.

What neither side of this argument points to is the OBR's description of its task as "impossible" since there are "major uncertainties" over its predictions - including banks' ability to lend to support the recovery, the extent to which the private sector can fill the gap left by public spending cuts, and worries over demand in Europe, the UK's major export market.

What both are doing is using the data to make the political argument for the prescription they'd already decided upon before the report was published.

It is a reminder that, rather like the long and bitter election row about £6bn cuts - smaller than the margin of error in the government's economic forecasts - it is a political judgement and not an economic forecast which will determine what's in next week's Budget.

The coalition's judgement is that it's necessary to cut quickly to reassure the markets and get the pain out of the way long before the next election. Labour's is that cuts threaten growth and a double-dip recession and that its role as the opposition is to oppose cuts, not to come up with its own.

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The Treasury will publish a document tomorrow which will invite the public to join a debate designed to produce a "fundamental re-evaluation of the role of government".

It will ask people to discuss whether the government needs to provide certain public services at all and whether someone else such as councils, voluntary organisations or companies, could do so more cheaply.

The idea has been copied from Canada which successfully cut its budget deficit in the 1990s.

The document will provide the framework for a debate involving government officials and ministers behind the scenes and consultations with, among others, business groups, trade unions and think tanks leading up to the unveiling of detailed spending cuts in the autumn.

The Budget in two weeks' time will set the government's spending totals for the next few years, but it will not outline the cuts to be made to individual programmes and departments.

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Milton Keynes: Three words stand out from - but few, if any, details.

The words tell the story that the prime minister wants the country to understand. They are "unavoidable", "legacy" and "together".

His message, in other words, is that of an economic wartime leader claiming to have inherited a crisis that we must all now act to resolve.

When I asked him to spell out what some of the cuts might be, or even when we might learn, he refused to do so on the grounds that first he needs to get people to understand there is a crisis that needs solving at all.

And yet, in answer to questions, he did reveal some of his thinking, talking of the need to cut public-sector pay, pensions and welfare benefits and saying that after the Budget on 22 June there would have to be a debate about what spending should be protected, including that on education, transport and infrastructure.

What is interesting is that so far he has turned his back on some of which were so successful in cutting their deficits - most noticeably cutting health, defence and international development spending.

Famously, as the most painful symbol of how things had to change. It is clear that won't be happening here; what isn't clear is what will.

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