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Page last updated at 11:22 GMT, Sunday, 25 January 2009

Government 'ineffectual' and 'panic stricken'

On Sunday 25 January, Andrew Marr interviewed Kenneth Clarke MP, Shadow Business Secretary

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

Ken Clarke warns banking system's not working and crisis is deepening.

Kenneth Clarke MP
Kenneth Clarke MP, Shadow Business Secretary

ANDREW MARR: This week the Governor of the Bank of England talked of "a pronounced contraction" in the economy, which sounds extremely painful.

So what would the Conservatives do to turn things round? Gordon Brown claims they'd do nothing at all.

At Prime Minister's Questions this week, he teased David Cameron about his new recruit to the Conservative front bench.

CLIP: PRIME MINISTER'S QUESTIONS:

GORDON BROWN: Mr Speaker, I think I should explain to him and he has got the benefit now of a new Shadow Shadow Chancellor to help him on his way.

DAVID CAMERON: I'm delighted he's mentioned my right old friend, the member for Rushcliffe.

I have to tell him the difference between this former Chancellor and that former Chancellor is this one left a golden legacy and that one wrecked it!

ANDREW MARR: Well I'm joined now from Nottingham by the new Shadow Business Secretary. Welcome. Can we start, I suppose, with the big picture...

KENNETH CLARKE: Good morning.

ANDREW MARR: Good morning.... which is, if I can put it this way - in previous decades this country lost a great deal of manufacturing capacity and now there is serious worry that the financial services industry, the city is going the same way. Is there a real question about what Britain pl...how Britain plc is going to earn its living in the future?

KENNETH CLARKE: Well you need in the modern world a diversified economy. We can't go back, so although we should have a bigger manufacturing sector and it's a pity that we've allowed it - to say the least - we've allowed it to shrink as it has, you need a diversified economy, you've got to join the knowledge economy, you've got to aim at global markets.

But all that will come when we have recovered. The financial services industry will be much smaller after this recession is over, but I think again once we've stopped the fire fighting and stopped the worst of the recession and start taking the longer term view, we still need to retain the best of the City of London because it is important to our economy that we remain an international global financial centre. So there's a balance in all these things.

But I don't think politicians should go back to having industrial strategies and deciding which bits of the economy or which companies they're going to develop for the future. That will be decided by our customers globally and not by politicians and civil servants.

ANDREW MARR: Your party's been extremely critical obviously of Gordon Brown and Alistair Darling for pumping all this money in at this stage and the level of debt; and yet, given the condition of the banks and how fragile their position has been, did there not have to be pretty massive bank recapitalisation?

KENNETH CLARKE: Well I supported George, who's taken the line I think - George Osborne - certainly as I did that we realise some money has got to go in, but the money's been pumped in ineffectually and it hasn't worked; and so far the crisis is deepening and we have not achieved the one key objective of getting the banking system to work normally again, lending commercially to good businesses and to people who can afford mortgages. So package after package has come out in a panic-stricken stream from the Government since well before Christmas. A lot of that money's already been lost and still, still it hasn't worked. So that's the real criticism.

And the other problem, the relevance of you know being careful what you do, is Gordon had been so irresponsible as Chancellor that we're burdened with debt already to a much greater extent than the rest of the Western economies, so that we're in even more difficulty when it comes to affording what has to be done. We can't afford to waste billions on failed packages which we already have.

ANDREW MARR: Wouldn't it be the right time from your own perspective now for Britain to join the euro in that case, given that we're near parity?

KENNETH CLARKE: No, actually in most ways the worst time. Firstly you know on the euro, politically it's not going to be on the agenda in this country for many years. You've got Nick Clegg later on who appears to be going back to it. It's not real and it's probably not going to be a political issue in this country during my political lifetime...

ANDREW MARR: (over) Good thing or bad thing?

KENNETH CLARKE: ...another ten years. But going back to whether we could join anyway, you can't start contemplating the euro in the middle of a financial crisis, in the middle of all this volatility in markets, wild fluctuations in the foreign exchange markets. It is nonsense to say that anybody's going to sit down and start negotiating Britain's entry into the euro.

I don't know whether it will ever come back onto the political agenda. I don't expect to see it. I certainly think actually at the moment if someone told me it was on the agenda, I would say you know in the middle of this crisis, you can't possibly do that.

ANDREW MARR: This is something that you've, you know mattered to you as a politician for a very long time and you've said all sorts of disobliging things about Conservative policy on Europe in the past, which I won't embarrass you by reading through, but I could. Are you concerned that you've...

KENNETH CLARKE: (over) Certainly.

ANDREW MARR: ...been brought back onto the front bench team to help win the election, but that you're not really wanted on voyage for the long-term?

KENNETH CLARKE: Well that's not the impression I've got. I think and I have to say I seem to be very much wanted on voyage - probably because I've been working closer and closer with George Osborne in these difficult times over the last few months, but it's up to David how long he wants me for.

And of course everybody knows I don't agree with David and my colleagues on Europe entirely and, as you say, you could easily look up speeches where I've been at odds with them, but compared with recent years I do think the euroscepticism, the settled policy of the party is moderate. I don't think anybody's going to change it and I'm not going to try to change it. I accept collective responsibility on the front bench and I accept that David is going to direct policy on eurosceptic lines.

I think if the general public, people listening to our programme found that David and I and George Osborne couldn't work together because of past disagreements over European issues that aren't actually topical at the moment, they'd think we'd lost all sense of proportion. What brings us together - David, George and myself - is a feeling of national emergency and a new government's required that is not only going to get us out of the dreadful events of 2009, but work out what kind of market economy we want to put back in place, how to start restoring Britain's position.

ANDREW MARR: You say these are past disagreements. But what, what in practical terms actually happens, for instance, in the run up to the June European elections? Do you go and do some bird watching for a while? Do you just take a vow of silence on these matters? What?

KENNETH CLARKE: Well I haven't finalised my plans. The bird watching sounds tempting. But I mean what I actually will accept, not only then but from now on, is that there is a settled policy in the party.

When David and I discussed this and he persuaded me to join, it was on the basis that there's settled policy and that I wouldn't try to change it, which actually I wasn't expecting to change it or try to change it at the time we had the conversation.

ANDREW MARR: So let's return to the main matter then: the economy. Is it possible that this country would go bankrupt, would actually be back in the 1970s position of having to go cap in hand to the IMF?

KENNETH CLARKE: I don't think it's a realistic possibility, though I mean I'm as gloomy as most people. I just think 2009 is going to be a dreadful year. And actually I don't want it to be. I think it's very important to realise the constraints of a responsible Opposition.

I think George has been putting forward some extremely good things. He was quite rightly urging recapitalisation of the banks, as incidentally I was, before the Government accepted it had to be. I think the loan guarantee system put forward by George would have been a good thing when he advocated it. It would have been better than the Government's policies and so on. But we can't block anything because I hope the Government does have something that works soon.

I don't want people to lose their jobs, I don't want people to lose their homes, I don't want the mess that we're going to inherit to be completely unmanageable when we take over. So we can't block anything as an Opposition. We have to make constructive suggestions and we have to ask the questions, which unfortunately Gordon Brown's incapable of answering, which is why he's near to losing confidence in the markets and in the wider world.

ANDREW MARR: Looking ahead, is the honest truth not that most people are going to have to pay higher taxes for a long time to come to pay for this and that any recovery is inevitably going to be a very slow and painful process?

KENNETH CLARKE: Well it depends on what we take over. I mean I think it would help if we could take over this year because you know in America they have Obama - a new government change and he's not having to fight an election campaign. I listen to Gordon Brown and actually I'm not quite sure whether he's trying to rescue the economy.

I think the way he puts it, he's constantly fighting a General Election campaign that he knows he's got to face, so he's short-termist in what he says. Now the resulting answer to your question is it's almost impossible to work out what debt we're going to inherit and how fragile the nation's finances are because they can't even explain what the key part of their latest package is going to cost. They're still working on it.

They won't know for weeks, they say, what it's actually going to cost. We are going to have difficulty getting gilts away as a nation. Sterling's already collapsed probably by a greater amount now than any time since the Second World War because the foreign exchange markets have lost confidence, but I don't think it helps for people to start dramatising it. The chap who said all the dramatic things last week - George Soros' partner Mr Rose - you know you can't dismiss it...

ANDREW MARR: (over) He said sell Britain - sell the pound and get out.

KENNETH CLARKE: (over)... he knows more about the foreign exchange markets than I do, but... Yeah, well people are doing that. But I mean I must say my reaction was I am gloomy, I expect 2009 to be bad, but I listen to him and I think no, no, no, it's not going to be calamitous like that.

It's just going to be very painful and the Conservatives are going to find themselves presiding over a difficult, difficult recovery which will probably take a few years when we get in.

ANDREW MARR: You yourself have been criticised heavily this morning for taking money from banks and also from British, American tobacco. I'm sure you expected that, but are you a little uncomfortable?

KENNETH CLARKE: Not in the slightest. I mean it's par for the course now. Poor old Peter Mandelson was accused of every sin under the book as soon as he took over.

When I was you know Industry Secretary, when I was Chancellor of the Exchequer, you had a lot of dealings with businessmen, and in those simple days when we weren't all accused of sleaze, you know we encountered them...

ANDREW MARR: And you'd do it all again?

KENNETH CLARKE: But I actually... Certainly I would because I actually never, ever was asked by anybody to do anything improper and probably because they knew only too well that they would have got a very, very firm reaction from me when they did. British politics you know is...

ANDREW MARR: And just sorry, on...

KENNETH CLARKE: There's serious allegations this morning against peers, which hopefully they can answer.

ANDREW MARR: (over) I was going to ask you about that.

KENNETH CLARKE: But British politics is not actually as you know penetrated by this kind of thing as the public have been led to imagine...

ANDREW MARR: Just as an...

KENNETH CLARKE: ...certainly in the far off, simple days.

ANDREW MARR: Just sorry, I beg your pardon...

KENNETH CLARKE: This kind of thing has gone.

ANDREW MARR: Sorry. As an old Westminster hand, I was going to ask you actually how seriously you regard the allegations made in the Sunday Times this morning about the fall over peers?

KENNETH CLARKE: Well I think the Commissioner for Standards has got to carry out an independent inquiry very rapidly. The men involved have got to have the chance to defend themselves and the allegations may be untrue.

If the allegations are true, I'm afraid this one is very serious. To take money to try to alter legislation for the benefit of the people paying you a fee is...

You know I think some people would call that corruption and so I hope they can clear themselves. But I think the sooner we have an independent investigation in what has been going on in the House of Lords is obviously called for.

ANDREW MARR: Thank you very much indeed, Ken Clarke.

INTERVIEW ENDS


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


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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