Asked what that meant in practical terms, the PMS said that it meant we were not going to cherry pick the bill and that we had to take into account the interests of taxpayers. As Lord Mandelson had been saying, the Government could not be expected to take responsibility for the pension deficit if the other challenges that faced Royal Mail were not also addressed. It was important to look at these problems as a whole, as Hooper recommended, which included issues such as investment, restructuring and modernisation. It was the Government s view that we needed to look at the Hooper package as a whole when market conditions improved, which would allow scope for finding private investment.

Put that the taxpayer was ultimately liable for the deficit, the PMS said that the pension remained a matter for the company and the pension trustees. We had been clear about the basis on which we would be prepared to take on the pensions deficit.

Asked what the situation was concerning the bill, the PMS said that we were not intending to take forward legislation until we were in a position to implement that legislation and we would not be in a position to implement that legislation until market conditions improved.

Put that the whole thing had been shelved, the PMS said that that was not a phrase we would use; it remained our intention to implement the Hooper recommendations and the legislation that we had taken through the Lords when we were able to implement it.

Asked what the difference was between market conditions now and when Lord Mandelson outlined his original plans in December 2008, the PMS said that we had seen a deterioration in the economic circumstances in the first half of this year, not only in this country but in the rest of Europe.

Put that when the original plans were outlined we had not expected the deterioration to be so sharp, the PMS said that we had been able to test the market since we introduced the legislation and it was clear that economic conditions had deteriorated in the last six months.

Put that Cabinet Ministers had been indicating that the economy would be getting better by the beginning of next year and asked if we could expect the bill to be back on track by then, the PMS said that people could expect it to be back on track when market conditions improved and we were in a position to be able to find a private investor. We would not give a forecast on the market for private investment in postal services.

Asked if the decision to delay the bill had had anything to do with internal opposition from Labour MPs, the PMS said that Lord Mandelson had set out the basis for the Government s decision in the House of Lords yesterday.

Put that people had been told that it was only the first quarter of this year that would be bad and that things would pick up in the second quarter, the PMS said that no one would argue that the sum total of what had happened over the first six months of this year represented a deterioration in economic conditions when compared to the end of last year.

Asked if there was a plan to do something similar with Royal Mail to what had been done with the banks this year, the PMS said that in terms of nationalised banks, as with the Post Office, we wanted to ensure that we got best value for money for the taxpayer.

Asked what the Prime Minister thought of the proposed strikes in London, the PMS said that the Prime Minister felt that the Royal Mail needed to change and modernise in order to turn itself around. Therefore, in his view, he did not think that planned strike action was necessary and that the unions and companies should work together in order to change and modernise Royal Mail.

Put that the Royal Mail was part of the Government s responsibility and Ministers could get involved in the sell-off if they wanted to, the PMS said that we had set out the conditions on which we would be prepared to take on the pension deficit but it was not a blank cheque. Strike action and modernisation was the responsibility of the management of Royal Mail and we would hope and expect the unions to work with the management in order to help modernise Royal Mail and turn its fortunes around.

Asked if there were any alternatives to a part-sale, the PMS said that the Government s view was that the best approach was as set out by Hooper and that was the approach we would continue to pursue.

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Put that the bill had been put through too quickly without enough thought for legal ramifications, the PMS said that the Prime Minister felt it was important that we moved from self-regulation to independent regulation and that, given the degree of public concern and the lack of confidence in the political system, it was important that we did this as quickly as possible.

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Asked if that meant that there was no basis to the story, the PMS said that we had not yet announced the transport budget beyond 2011 because we had not yet conducted the spending review for that period yet.

Put that Transport was one of the departments that would be giving money to the Department for Business, the PMS said that there was a transfer of money from Transport to Communities and Local Government for social housing, but that was for this spending review period (2009/10 and 2010/11). The story in the Guardian was about what would happen beyond 2011. In any case that particular transfer of money from Transport reflected underspends in the department, which was money that had been freed up because the PFI market was unfrozen and therefore the Government needed to set aside less money to support PFI projects.

Asked when crossrail would start, the PMS said that crossrail remained on course and our position had not changed; the previously announced timetable remained.

Put that projects like crossrail would get sidelined because money was being taken out of certain departments, the PMS said that we were also planning to engage on an ambitious programme of asset sales, which aimed to raise 16 billion that would be additional money available for gross public investment.

Asked if that would be enough money to make up the gap, the PMS said that we had not yet set the spending envelope for the next spending review period.

Put that capital expenditure was currently at 3% of GDP and would go down to 1.25% of GDP, the PMS said the Treasury had set assumptions for the period beyond 2011, which formed the basis for their projections for the period beyond 2011. The Treasury had not yet set the spending envelope for capital expenditure for the period beyond 2011.

Asked how you could make 1.25% of GDP from 3% of GDP by selling 16 billion worth of assets, the PMS said it depended on the timescale over which we sold the assets. We were not setting the spending envelope now. The journalist was trying to present this as a fixed Government spending envelope beyond 2011, but what was clear in the Budget was that these were assumptions that underpinned projections.

Put that other transport plans like electrification and high-speed rail were dead in the water, the PMS said that the remark was not justified because we had not yet set our spending plans beyond 2011. When we did set our spending plans for beyond 2011 it would be on a fully costed basis. You would be able to reach conclusions about which projects would be going ahead at that point.

Asked if there was going to be a cut in the Ministry of Defence s budget, the PMS said that we set out our spending totals for the Ministry of Defence as we had done for all departments, up until 2011. We had not yet set out the spending total for the period beyond 2011.

Asked how the 16 billion of asset sales would cover the gap in the Whitehall budget if local councils kept their money, the PMS said that we had not set spending totals for the period beyond 2011, but simply wished to point out that we had 16 billion of asset sales that was based on a thorough piece of analysis by independent reviewers on the run-up to the Budget. The 16 billion was additional money that was available for public sector gross investment. Local authorities invested capital resources, as did central government, so this potentially made more money available to local authorities and central government. We were not making decisions now about the allocation of resources or the total of resources available beyond 2011.

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Asked if MPs would be given the chance to question a Business Minister in the House of Commons, the PMS said that there would be plenty of opportunities for MPs to cross-examine the Business Minister Pat McFadden, who also attended Cabinet.

Asked about the situation in Iran, the PMS said that the Foreign Office had put out a statement last night, which confirmed that of the four Embassy staff who had previously been in detention, two had been released over the last two days. We were also seeking confirmation following Iranian reports that a further member of staff was released yesterday. It remained our top priority to get all British Embassy staff released as soon as possible.

Put that the German Finance Minister had said that there was reluctance from Britain to regulate the banking industry, the PMS said that we were determined, as were all members of the G20 including Germany, to implement the G20 conclusions and that was what we were doing in relation to financial services. We would be publishing our proposals to reform regulation of the financial services soon. Germany had done this with its announcement of a third fiscal stimulus in recent days and we were sure that all other countries would also push ahead with implementation of the G20 conclusions.

Asked if we were on the same page as Germany, the PMS said that there had been very constructive discussions at the European Council on these matters recently.

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Put that the Prime Minister misspoke, the PMS said that that was correct and that the Prime Minister did not have an opportunity to correct what he had said because it was noisy in the Chamber and he was interrupted. However, when he replied to the second question he had an opportunity to clarify what he had said and made it clear that he had been referring current spending.

Asked to clarify the percentages that were talked about at PMQs, the PMS said that they were assumptions that changed and had changed in every Budget and Pre Budget Report (PBR). The assumptions that the projection for spending for the period beyond 2011 were based on was an assumption that public sector current expenditure would grow at 0.7% on average in real terms from 2011/12 to 2013/14.

Put repeatedly that that didn t explain why the Prime Minister had said 0% rather than 0.7%, the PMS said that the Prime Minister had been talking about a rise and the rise he referred to was the rise in current expenditure, which he made clear when he had an opportunity to reply to the second question when he said that he had told Mr Cameron previously that current spending would rise.

Put that the Prime Minister was not interrupted and that he misspoke, the PMS said that when the Prime Minister was talking about 0.7% he was referring to current spending. The first opportunity he had to clarify that current spending was what he had been referring to was during his answer to the second question. The interruption meant that he didn t have a chance at that point to finish what he had been saying.

Asked if the figures that the percentages were based on were the same figures the Prime Minister gave at PMQs three weeks ago, the PMS said that they were all based on the assumptions that were set out in the Red Book.

Asked what the difference was between an assumption and a projection, the PMS said that we made projections on the basis of assumptions and we made assumptions about individual components. The difference was that we had set an envelope for total spending for the period up to 2010/11 but we had not yet set an envelope for the period beyond 2010/11; we would do that at the time of the spending review when we were in a better position to be able to forecast debt interest and social security benefit for unemployment.

It was important to remember that projections could change, for example in the 2009 Budget the assumption for public sector current expenditure was a growth of 0.7% and in the 2008 PBR public sector current expenditure was projected to grow at 1.2%. Assumptions moved around from PBR to Budget but they only got set when we did the spending review and set the total limits on public spending and the division between departmental spending and other spending.

Asked what an envelope was, the PMS said that an envelope was the total limit of expenditure, which we set at the time of spending reviews.

Asked what the assumptions were based on, the PMS said that they were based on the forecasts that were set out at the time of the Budget, which were also assumptions that underpinned the public finance projections. It was all interrelated as we based public finance projections on the basis of assumptions about growth, which changed as well.

Asked when the spending review would happen, the PMS said that it was a matter for the Chancellor.

Put that the Government s assumptions assumed that total spending would in real terms be static, the PMS said that the figures were set out in the Red Book; these were assumptions that changed between Budgets and PBRs.

Put that the assumptions showed that there would be cuts, the PMS said that we had always made clear that we set our spending totals up to 2010/11. The period beyond that was a matter for the Chancellor and the spending review.

Put that there were no spending figures to rely on after 2010/11, the PMS said that we hadn t set the spending totals beyond 2010/11 and we had been clear that this would be the wrong time to have a spending review.

Put that there was no point saying the Government hadn t set out spending for beyond 2011 because the Prime Minister read out figures in the House of Commons three weeks ago, the PMS said that the Prime Minister read out the projections that were in the Red Book. We had not claimed that the figures the Prime Minister read out would determine what the spending review was going to be; we said at the time that we would not be setting the spending review. If you look back at the practise of all the previous spending reviews there was always a clear moment when we set out the total spending envelope and that was normally done in a Budget or a PBR.

Put that the figures had not come out of the Red Book and it was the first time anyone had heard them, the PMS said that they could be derived from the Red Book. We had not set the envelope for the total spending for the period beyond 2010/11.

Asked for some examples of the assumptions, the PMS referred journalists to the Budget, page 218, paragraph C4, Annex C, which set out the assumptions that underpinned the fiscal projections.

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Asked if that meant that the bill was being delayed until a sale was possible, the PMS said that Lord Mandelson had said that when market conditions changed we would return to the issue.

Put that the bill would not go through the House of Commons at all, the PMS said not to make that conclusion; when market conditions changed we would return to the issue.

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Put that there had been a breach of the guidance, the PMS said that the guidance was a matter for the Cabinet Secretary.

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Asked if anything further had happened since the weekend, the PMS said that it was best to check with the Foreign Office, however there had been very high-level discussion of Foreign Ministers that took place on Sunday.

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Asked what access opposition parties had regarding information on public finances, the PMS said that it was best to check with the Cabinet Office, but there was something called the Directory of Civil Servants Guidance, which set out the established procedures regarding contact between senior civil servants and the Opposition.

Asked if the Prime Minister believed such information should be made available so the public could come to a direct conclusion about the decisions the Government and the Opposition made, the PMS said that the Prime Minister set out his position in his letter to the Leader of the Opposition on 19 December last year when he said that contact should be on the same basis as before; in line with longstanding convention and in full accordance with the Civil Service Code and Directory of Civil Service Guidance. It was not for the Prime Minister to get into the specifics of what that meant in practice, as it would be inappropriate for him to do that.

Put that it was ultimately a decision for the Government as to whether or not this information could be made public, the PMS said that, without getting into specifics, we made a lot of information about public spending available to the public, for example the Budget and the Public Expenditure Statistical Analysis contained detailed information on public spending.

Asked if George Osbourne s claims came as a surprise to the Prime Minister, the PMS said that the Prime Minister felt it was right that there should be contact between the Opposition Party and the senior civil service, which was why he wrote to David Cameron in December last year to authorise such contact. It was also the Prime Minister s view that such contact should be in line with the normal conventions. There should not be any involvement from the Prime Minister regarding the manner of that contact.

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Asked if the Prime Minister communicated the fact that he received a letter from the House of Lords saying that there would be problems giving Michael Martin a peerage, the PMS said that that was the journalist s interpretation of their advice and that he was not going to get into the specifics; there was a long-established convention that previous Speakers received peerages, there had been an uncontested motion that went through the House and The Queen had decided to grant Michael Martin a peerage.

Asked if the Prime Minister was prepared for the letter to be published, the PMS said that the normal convention was that the advice of the House of Lords Appointment Commission was kept private.

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