Election last thing on my mind

On Sunday 04 January, Andrew Marr interviewed The Prime Minister, Rt Hon Gordon Brown MP

Please note 'The Andrew Marr Show' must be credited if any part of this transcript is used.

The Prime Minister insists he has 'no plans' to call a General Election this year.

The Prime Minister, Rt Hon Gordon Brown MP

ANDREW MARR: Well I'm joined now by the Prime Minister.

Thank you for joining us this morning, Prime Minister.

I should say the opposite since I'm joining you in a sense.

Can we start by talking about the overnight events...

GORDON BROWN: Yes.

ANDREW MARR: ... the Israeli incursion into Gaza. Everybody had been begging them not to do it. They've done it. What would you like them to do now - pull back?

GORDON BROWN: Well this is a very dangerous moment. I think everybody round the world is expressing grave concern. What we've got to do almost immediately is work harder than we've done for an immediate ceasefire.

I can see the Gaza issues for the Palestinians - that they need humanitarian aid - but the Israelis must have some assurance that there are no rocket attacks coming into Israel. So first we need an immediate ceasefire - and that includes the stopping of the rockets into Israel. Secondly we need some resolution of the problems over arms trafficking into Gaza. And, thirdly, we need the borders, the crossings open, and that will need some international solution.

Now I think the key to this is that the international powers are able to give guarantees first of all about ending the tunnels, and that will require Egyptian action; secondly about stopping the supply of arms, and that will require the whole of the Arab league to be united on that; and, thirdly, about some international monitoring and execution really of the crossings, so that they can actually happen with the assurance that things are going properly.

ANDREW MARR: (over) When you say, "We need these things to happen", there hasn't been any effective pressure on the Israeli side because they've gone ahead and done what they were going to do in the first place. Have you been able to talk to the Israeli Prime Minister? Are you going to be talking to him?

GORDON BROWN: I've talked on three occasions in the last few days to Ehud Olmert, the Prime Minister of Israel. David Miliband's been talking to the Defence Minister, Mr Barak, and to Mrs Livni. We have continued to talk to them about what are the guarantees that they need for the action to stop.

And I've tried talking to President Abbas and others are talking to people within the region. There was an opportunity with the Arab Council meeting a few days ago and that didn't materialise. We've got to try harder.

ANDREW MARR: So there's a frustration about getting hold of the people in Hamas you need to talk to?

GORDON BROWN: Well it's more that the Arab powers have got to put the pressure on that is necessary.

Stop the supply of arms, make sure that the tunnels that are being used for the illegal passing of arms into Gaza are closed and we do something to re-open the crossings, which of course would mean that there would be a flow of people and goods in but done on a properly monitored basis.

Now I sense that the Arab powers are as worried as we are about the turn of events and what I believe has got to happen in the next few days is that we have got to work with them and of course with the United States and the European Union - and President Sarkozy is visiting the region tomorrow - so that we can actually get both the ceasefire, and that means the stopping of rocket attacks into Gaza as well. We should get an agreement on arms trafficking and we should get an agreement on the crossings.

ANDREW MARR: It sounds almost as if you agree with the Czech President that this is a defensive action by the Israelis.

GORDON BROWN: No, that's not what I'm saying. We need an immediate ceasefire. The blame game can continue afterwards, but this dangerous moment I think requires us to act and act in a diplomatic...

ANDREW MARR: (over) There's no real pressure on the Israelis, is there?

GORDON BROWN: Oh yes, there is.

ANDREW MARR: Why would they stop now?

GORDON BROWN: Because they know that there is a problem about where it all stops. They know that there is an international press... Look, what is the basis of an agreement between Palestine and Israel? Let's be honest about the basis. The basis is that Israel needs to be secure within its own borders, otherwise there won't be an agreement, and the Palestinians need to have if you like the ability to have a viable state.

ANDREW MARR: Enough land to make a state that works.

GORDON BROWN: And that is what we've been talking about. I believe the Annapolis process, which has run into the ground obviously in the last few days, has been the basis on which it can happen.

There are talks that are going on that would actually take us beyond the immediate violence into the sort of solutions we want, but the very events that we're seeing emphasise what the real challenge is. Israel needs to be secure; Palestine needs to be viable. Palestine needs to have humanitarian support and the Palestinians of course need that. The Israelis need to be sure of their security.

ANDREW MARR: Let's turn, if we may, to the British situation - the British economy, in particular. I'd like to talk about the policy prescriptions in a moment, but before we do that I'd like to ask you - you see all the statistics coming across your desk, you know they come in day after day - what your judgement is about what this year is going to hold for us. Are we going to see three million unemployed? How bad is it going to get?

GORDON BROWN: It's very difficult. Look, we've had the first financial crisis of the global era. The global banking system virtually collapsed and we had to try to rebuild it. And it's not just a financial problem in Britain. It started in America and it's felt round the world.

So solving that problem has involved a number of stages. One, we had to give the banks liquidity to keep going. Then we had to give them the capital that was necessary for them to sustain themselves. Now we've got to get them back to doing what banks should do, which they're not yet properly doing, and that is lending.

ANDREW MARR: I want to come onto the banks in detail. I'm just wondering about all those people watching and wondering about their jobs, they're wondering about their houses, they're wondering about their businesses. They're saying here is somebody who has access to more information than we've got. What's it going to be like?

GORDON BROWN: Well it's a challenging and difficult year and what I'm trying to do in the next few weeks - as we deal with the fundamental causes of this, which is the banking system and it's a global banking system problem - is to give real help to people, people worried about their jobs.

So we will have a number of programmes that will help people either retain their jobs or help people move to new jobs or get the skills and training for these jobs.

We've got our mortgage protection scheme, which is to help people stay in their homes and we're not going to do what happened in previous recessions and allow people to go under. And then the small business issue and the jobs in small businesses and even larger businesses. That is a bank funding problem and we've got to solve that problem over the next few weeks. Now that is what we are urgently talking about with the banks at the moment.

ANDREW MARR: How long do you think this is going to go on for?

GORDON BROWN: Well, I think that depends you know on the level of international cooperation. You see if we do something in Britain, its effect could be magnified twice over if other countries did it alongside us.

So when President Obama takes over in America - and that's a very important moment because he has promised a huge economic programme, something that draws on some of the things that we are doing but probably will go beyond that - and that is a very important moment because then we'll see America, Britain, some other countries in the rest of the world working with a fiscal expansion programme...

ANDREW MARR: But it... I mean most...

GORDON BROWN: ... that will start to make a difference. And when people ask...

ANDREW MARR: Most economists... Just to interrupt you for a second. Most economists and outsiders think this is looking like you know a two year recession at best, and it's going to be long and it's going to be deeper perhaps than the Government first indicated.

GORDON BROWN: Well I think that does depend on the level of international cooperation. You see we can... We put 18 billion into the economy a month ago. Now only one billion of that has been actually spent, so 17 billion of that is still to go into the economy. And so over the next few months people will see the effect of that increasing activity within the economy.

President Obama will put you know a trillion or something into the economy over the next few months in a two year programme and that will start over time to have an effect. Now if all of us were doing it together - and that's the argument about why we are holding this major G20 meeting in London here in Downing Street in London, we will be debating these very, very issues - if we can persuade the rest of the world to do things together, then the effect could be twice as big as each of us doing things individually, and that's what I'm trying to get to over the next few weeks.

ANDREW MARR: So we are clearly looking at a very, very difficult year. One of the things that's going to happen, as you know, all the way through this year is people are going to be looking at one indicator and another saying ah, Gordon Brown, he's going to call a snap election or he's going to call a quick election. Can you at this stage at least put us out of our misery and say there's not going to be an election this year?

GORDON BROWN: It's the furthest thing from my mind. It is the furthest thing. Look, my...

ANDREW MARR: It would be wrong to hold an election while this is going on.

GORDON BROWN: My duty in these circumstances is to do everything I can to give real help to people now, and I think my undivided attention, my whole focus, the priority of the year is to make sure that we can give that real help to families worried about their mortgages, people worried about their jobs and businesses worried about their ability to survive.

Now I think we can make a difference and what I'm not going to do is accept the defeatism of people who say nothing can be done and say you've just got to live through this downturn...

ANDREW MARR: So if your focus is...

GORDON BROWN: ... you've just got to do and wait until something turns up. We are going to act in a way that previous governments didn't do to make sure that through this downturn people are protected; and where we can do so creating jobs and where we can do so helping people sustain their mortgages.

ANDREW MARR: You have said that that's what you're going to focus on for this year. You would put so many people out of their misery and you'd remove such a lot of static from the political conversation if you were able simply to say, "Listen, no election this year".

GORDON BROWN: It's the last thing on my mind. I'll just tell you that.

ANDREW MARR: Alright, but if I say "No election?", you say "It's the last thing on my mind?", there's still a little bit of a gap...

GORDON BROWN: (laughs) I'm saying it's the last thing on my mind. I've got no plans for that because basically what I am trying to do is to sort out what is a very difficult economic situation.

Now you see the problem in Britain is unless we know what the cause of this problem is, we can't solve it, and what I feel people should begin to understand over the course of the next few months is this is fundamentally a failure of the banking system.

It's a failure of the global financial system to work. Probably the measures that we proposed years ago should have been implemented to make it a global financial system in proper supervision, but that hasn't happened and it's got to happen now. And then...

ANDREW MARR: You think... Can I just ask you, I mean do you feel some sense of responsibility for that yourself since you were Chancellor for ten years during that period?

GORDON BROWN: I feel that if the world had listened to what we were saying ten years ago that we...

ANDREW MARR: You could have acted more here, couldn't you...

GORDON BROWN: Well, I don't...

ANDREW MARR: ... over the last ten years? I mean the banks are saying they've got things wrong, the Bank of England's saying it got things wrong. Surely you must have got things wrong too?

GORDON BROWN: Well of course I take responsibility, but in the end you've got to locate the problem where it is otherwise you can't solve it. You see some people say it's a problem of personal debt in Britain or some people say it's the Government has borrowed too much. Actually the problem is - and this is what's causing mayhem in countries everywhere round the world...

I mean 60,000 factories have closed in China, governments are guaranteeing government debt and guaranteeing banks about 7 trillion dollars at the moment. So this is a huge global problem and it's basically the result of a financial system that wasn't geared up properly to be supervised in a way that you need to have supervision when you've got a world financial system.

ANDREW MARR: But shouldn't you as Chancellor of the Exchequer have noticed this?

GORDON BROWN: But this is what I've been saying for ten years. If you look back on my speeches, I've been pleading with people to have an early warning system for the world economy, to have a proper system of global financial supervision, to recognise that national supervisors can find out...

ANDREW MARR: (over) But it was our... I mean it wasn't just American banks. It was British banks. It was our banks, it was Scottish banks.

GORDON BROWN: It's a problem that started in America. A shadow banking system started to develop in America. It wasn't properly disclosed even sometimes to the company executives. I would have thought that people looking at some of the banks at the moment, who've now taken over and replaced those who've been there, will have found that even the boards of these banks did not know the level of exposure. And it's very difficult in these circumstances for the Government...

ANDREW MARR: Yes.

GORDON BROWN: ... which doesn't own banks until we've had to take action to buy shares in them, to know what's happening in an individual bank.

ANDREW MARR: So you didn't know what was going on with the banking system and you put in place a regulatory structure, the FSA, which wasn't able to get its hands on it either. That must be a failure.

GORDON BROWN: I've got to say to you that the regulatory system in Britain is better than it has been in other countries, and I've got to say to you that our decision to bring the financial services systems together...

ANDREW MARR: So...

GORDON BROWN: ...under one regulator was a better system. But if you want to go into the roots of this problem, as I do, and understand what actually happened - what happened is that unsupervised lending, mainly starting in America, allowed the banks to leverage up far more money than they were capable of sustaining once property prices started to fall.

ANDREW MARR: But, I'm sorry, that happened here too. It happened with British banks...

GORDON BROWN: But most of our exposures...

ANDREW MARR: ...British banks regulated by you.

GORDON BROWN: Hold on, Andrew. Let's get the facts clear. Most of the exposure of British banks to defaults that are arising are international, and if you don't have a proper international regulatory system, you don't have supervision across borders, don't have what we're proposing, which is colleges of regulators that will cover these big companies when they operate across borders, it's very difficult to know exactly what was happening.

And if you want, as I do, to get to the roots of the problem, then it is a global financial system that has been in the making. It has not been properly supervised and has to be properly regulated. Wrong decisions were made about the ability to leverage up the assets (or the liabilities in these cases) of these banks and financial institutions. And this problem that mainly started from America is something that we have got to all deal with in every country of the world, and that is the root cause of what we're dealing with and that's why we need the global measures as well as the national measures that I'm talking about.

ANDREW MARR: Hindsight is a wonderful thing, and we all know that, but what would you have done differently had you known what was going to happen?

GORDON BROWN: (over) In 1998, after the Asian crisis, which has got some parallels with what happened here, I went to the meetings of the international community, G7, G20 and IMF and we proposed an international supervision system and we proposed that there would be an early warning system for the world economy because the supervisors of the world economy would need...

ANDREW MARR: (over) The problem is that's what you did do; it's not what you would have done differently.

GORDON BROWN: But we didn't succeed.

ANDREW MARR: Ah, okay.

GORDON BROWN: We didn't succeed. We persuaded people to set up a useful organisation called the Financial Stability Forum, we brought in some reforms into the International Monetary Fund...

ANDREW MARR: But not enough.

GORDON BROWN: But I've just got to be realistic. You're dealing with a large number of different players round the world who've got their own separate interests in what needs to be achieved. I mean China's been running surpluses; America's been running deficits; the European Union has got the protection of the euro as a major...

And you've got to persuade people to do these things and that is what international action is all about: persuading people. And that's why our G20 Summit, which is to take place here in London, is an important time where I think with President Obama, with the unity of the European Union on this, we can make real progress. But this is a global financial crisis that has got to be dealt with at least in part by the global cooperation that I've always been seeking.

ANDREW MARR: Let's look at some of the specific policy things that you've done. 37 billion pounds into British banks to persuade them to start lending. I put it to you...

GORDON BROWN: (over) That's to save the banks. If we...

ANDREW MARR: To save the banks and then to get lending going, but the lending is not happening.

GORDON BROWN: Hold on. If we had not acted that weekend and then the rest of the world acted, you would have had a banking collapse.

ANDREW MARR: Would we have lost the Royal Bank of Scotland?

GORDON BROWN: You would have lost major institutions in America, Britain and in the rest of Europe. And so the recapitalisation of the banks, which is essentially us taking shares in the banks, was a necessary means of stopping... And people say well why do you do that, help banks? We're not helping banks per se. We're helping secure people's savings and their ability to use the banking system, so that they have some security in their lives. And as people have gone on in this crisis, they've realised, Andrew, just how important the financial system is to everything we do in all our lives.

ANDREW MARR: But I put to you so far that this is... in terms of getting the banks lending again, getting money to small businesses, all the reports in all the papers say it ain't working and you're going to have to put more money into the banks.

GORDON BROWN: Well from January 1st, we've got the Small Business Scheme, we've got the Export Credit Scheme, we've got the ability of companies to defer their payments to the Inland Revenue. We've got other means by which we will try to get liquidity and cash into the system.

ANDREW MARR: So not a second round of recapitalisation?

GORDON BROWN: Well, I don't think that's the first thing that anybody would think about at the moment. I think the first thing we're thinking about is how we as a government can help the flow of money to businesses, how we can get the banks doing what they said they would do after the recapitalisation, and that is maintaining the level of funding for small businesses and mortgages that happened in 2007, which was a very high year. We've got to accept that we've lost some of the bigger players or some of the players in this market...

ANDREW MARR: And we're going to lose more probably.

GORDON BROWN: Well, so that the existing institutions are going to be expected over time to do more. But I don't think...

ANDREW MARR: (over) Good idea to underwrite...

GORDON BROWN: ...I don't think you can judge the success of recapitalisation by what happened in one month. I think you've got to judge it as a necessary means by which by saving the banks - and saving is the right word - we restore the ability for them to fund businesses and mortgages, and that will happen over the next period of time.

ANDREW MARR: So the bank system remains. The other part of your strategy recently was to cut VAT to increase spending, to persuade people to spend. That hasn't worked either.

GORDON BROWN: Well that was the right thing to do because it brought greater emphasis on consumer action in the economy. But you've got to remember...

ANDREW MARR: It's not going to save the retailers and actually...

GORDON BROWN: (over) No hold on, you cannot judge it.

ANDREW MARR: ...perhaps people shouldn't be spending more.

GORDON BROWN: Well that's a very moralistic view that you're taking.

ANDREW MARR: Well the bishops themselves are saying "morally corrupt", "morally outrageous", "morally extreme" actually.

GORDON BROWN: (over) I know and I think it's really interesting this debate, Andrew, because you know I come from a Presbyterian background...

ANDREW MARR: Yes.

GORDON BROWN: ...and the work ethic is important and being prudent is important. But, look, I just say to you one thing. If an economy is not moving because private sector activity has slowed or actually in some cases diminished, then government has a role to play. It's the only way of getting the economy moving. This is not a debate between...

ANDREW MARR: So okay...

GORDON BROWN: By the way, this is not a debate between Keynesians and Monetarists. This is a debate that all economists agree that if the economy cannot move because private sector activity is not working and the markets are not working to the best effect, then the Government has got to step in, take that. We have I think spent a billion pounds so far out of an 18 billion injection into the economy in the pre-Budget Report...

ANDREW MARR: (over) An outrageous waste of money, says David Cameron, because it hasn't persuaded people to spend anyway.

GORDON BROWN: He's completely wrong because this will be shown over a period of time. If we've spent one billion of a total of 18 billion to be spent - some on public works, some on keeping people in their jobs, some on environmental and green projects, some on helping more people go to university and college - all these things will happen, but we have just started and we've spent one eighteenth of what we're going to inject into the economy. Now you can't judge a success or a failure by the first few weeks. You've got to judge it over the next few months.

ANDREW MARR: What about all of those people who've done the right thing - who have saved, who haven't splurged, who haven't maxed their credit cards and are living on investments, most of them pensioners with interest rates almost at zero. They are going to have an utterly bleak time and they're very, very worried about the future. They feel that they're being made to pay for the people who behaved badly.

GORDON BROWN: Well, look, we are looking at means by which we can help pensioners and others with their savings and that is one of the things that we'll look at in the run up to the Budget and I'm very conscious that people have saved money all their lives, need the best deal that is possible. But remember that the worst...

ANDREW MARR: (over) And if interest rates are down there, there's nothing you can do to help them.

GORDON BROWN: But hold on, Andrew. Remember that the worst thing that could happen to a pensioner on a fixed income, or other people who've got limited savings and are on these fixed incomes, is if inflation went out of control. And throughout the whole of the last eleven years, we've kept inflation under control, we've kept interest rates relatively low as a result of that...

ANDREW MARR: And you...

GORDON BROWN: ...but it's necessary at the moment for the economy to have low interest rates, I think most people would agree, for there to be economic activity. So the answer is not that there be high interest rates and high inflation. The answer is that we do more to help savers, which is what we're looking at.

ANDREW MARR: But far from it being high interest rates, I mean we're looking at interest rates going below 2% everyone seems to agree.

GORDON BROWN: Well this is why...

ANDREW MARR: Down to 1%?

GORDON BROWN: Well in America, they've gone to zero, to 0.5 already.

ANDREW MARR: And we could see the same here, do you think?

GORDON BROWN: That's a matter for the Governor. And of course...

ANDREW MARR: But it's not unthinkable, as far as you're concerned?

GORDON BROWN: ...I'm in regular consultation with him. These are extraordinary times because...

ANDREW MARR: Sorry, can I just stop you there? Zero interest rates not unthinkable?

GORDON BROWN: That's a matter for the Governor. It's a matter for his decision.

ANDREW MARR: We've never had that in this country.

GORDON BROWN: I think you'll probably find that the fall in the oil prices is pushing inflation down, the fall in interest rates is helping to push inflation down at the moment, we've got an exchange rate pressure upwards. So it remains something that the Governor will continue to look at.

But these are extraordinary times because monetary policy, which is simply cutting interest rates, is the usual means that people have said to deal with the problem. You've got this global financial crisis and there is a loss of confidence in the banking system. That's the key to this and therefore monetary policy doesn't have the proper transmission mechanism through the banks to make it most effective. And that's why this argument in Britain about whether we should use fiscal policy or not is totally resolved, in my view.

If the monetary system is not working as well as it should, if there's no likelihood of huge inflation in the next period of time, if you're not crowding out private investment, then government must play its role. And that's why I really think that those people who are saying don't use fiscal policy, don't be active, just let the recession take its course - the Conservative view, which I think is wrong because it's, in a sense, almost revelling in things going wrong... Things are going to go right because we take the action that is necessary.

ANDREW MARR: And yet, let's come onto the cost of this. In the Budget, there were various statements made about overall government debt and they weren't just wrong; they were wrong by an eye watering, jaw dropping scale - £90 billion out for this year; 70 odd billion pounds out for the year ahead and so on - and we're going to end up as a country in four years time, five years time owing a trillion pounds of debt. Now this is just an astonishing figure and when people say...

GORDON BROWN: Andrew, you've got to get this in perspective. This is dealing with a global financial crisis. Every country is adding to the investments it's making and, therefore, to its debt. We have got lower debt than America, than France, than Germany, than Italy, than Japan, all the major countries, and even after everything that they do...

ANDREW MARR: But sorry...

GORDON BROWN: ...even after everything we do, we will have lower debt than them then. And, therefore, the idea that there's something unique happening in Britain and that somehow we're uniquely responsible for the raising of debt. In America...

ANDREW MARR: Government...

GORDON BROWN: ...I've got to tell you in America, debt is rising a lot faster than in Britain.

ANDREW MARR: Again you're talking about proportion. You've got debt just below 30% at one point and it's going to go up to 57% or thereabouts. That is absolutely astonishing...

GORDON BROWN: And in America...

ANDREW MARR: ...and people have to pay for this for a generation.

GORDON BROWN: But in America they're predicting that debt goes up to 80%. In France, it's already at 57 or 58. In America, France, Japan, Italy, I think Japan and Italy are around 100% of national income. So this is... I'll just say to you...

ANDREW MARR: Two quick questions, if I may, just on...

GORDON BROWN: Well if I just finish this. When people start to say look here is a problem specifically British, that you've got a high level of debt, it's completely wrong. We are in the best...

ANDREW MARR: Well...

GORDON BROWN: ...possible situation to deal with a difficulty because we've got...

ANDREW MARR: We owe a huge amount. You owe a huge amount and we're going to have to pay for it for years and years to come.

GORDON BROWN: I don't accept that.

ANDREW MARR: Can I just ask you...

GORDON BROWN: We're in the same position as other countries, perhaps in a better position.

ANDREW MARR: No temptation to go for the euro now we're one to one parity?

GORDON BROWN: I don't see how that would solve the difficult global financial issues we've got.

ANDREW MARR: And one other global issue, if I may: Guantanamo Bay. We're being asked, we're told, whether we would take some of the inmates, perhaps people who haven't got any connection with this country, to allow the United States to close Guantanamo Bay. What would your answer be?

GORDON BROWN: Well I'm not aware of any direct request on that at the moment.

ANDREW MARR: Would you say yes or no?

GORDON BROWN: Well I think we've got to look at what's going to happen round the world as a result of the closure of Guantanamo Bay. We've called for that closure for some time.

ANDREW MARR: Sure. The Australians are saying no. That sounds like maybe.

GORDON BROWN: But we haven't been asked to and you've got to look at the circumstances at the time. This is a very difficult situation. I do think the closure of Guantanamo Bay is a necessary means by which we reassure people that we're going to do everything in the right way in future.

ANDREW MARR: You would change the political mood in the country quite dramatically, the only person who can do so, were you to say now there will not be a General Election, I can promise you, in the year 2009.

GORDON BROWN: (laughs) I've told you I've got no plans for it and I've told you it's not the first thing on my mind. But I tell you this: that's what I've said.

ANDREW MARR: Alright. For now, Prime Minister, thank you very much indeed for joining me.

INTERVIEW ENDS

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Please note "The Andrew Marr Show" must be credited if any part of this transcript is used.

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NB: This transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy

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