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Page last updated at 12:27 GMT, Sunday, 17 October 2010 13:27 UK

Osborne: 'We have to see this through'

On Sunday 17th October Andrew Marr interviewed Chancellor George Osborne

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

ANDREW MARR:

Well the Chancellor of the Exchequer is here to respond to all of those things now. Welcome. First of all, maybe let me ask you about the big picture. Chris Huhne, helpfully or otherwise, has said that you're not "lashed to the mast" on this policy. Is that right?

GEORGE OSBORNE:

Well our plan is the plan that will restore credibility to the public finances. It's what the IMF, the OECD, international observers of the British economy say is necessary, it's what British business says is necessary. So we have to see this through, and the course that I set out in the budget is the one that we have to stick to because people in this country know we were on the brink of bankruptcy and if we're going to have growth and jobs in the future, we have got to move this country into a place where people can invest with confidence.

ANDREW MARR:

You clearly need to make the savings and the cuts and raise some taxes. On the other hand, as the helmsman, if you hit very, very rough waters - Ken Clarke's talking about you know a possibility of a really, really severe new global recession - presumably you are able to change course? You don't go straight through the typhoon.

GEORGE OSBORNE:

Well the situation you're talking about - if that were to emerge, almost the first consequence of it would be concern in the European continent, including you know for the United Kingdom …

ANDREW MARR:

Yes.

GEORGE OSBORNE:

… about our national debts and our deficits. That's where I suspect it would go first.

ANDREW MARR:

So you'd carry on cutting even if there was …

GEORGE OSBORNE:

Well you would have to show the world that you had a credible plan to reduce your deficit. That would be, I suspect, where world attention first turned and that's why this is so important. I mean when we were sitting here before the election actually people had a real question mark over Britain's ability to pay its way in the world, and our interest rates were similar to those that you could get in Portugal, in Spain and other countries that people were questioning. Today our interest rates are a full one percentage point lower than that time of the election, and that is because people have more confidence in us. They see this new coalition government has come together, produced a credible plan; and there is a stimulus, a monetary stimulus, lower interest rates, that every family, every business in this country can call upon. And I'm not prepared to go back into the place we were five months ago on the brink of bankruptcy, on the edge of an economic abyss, with people around the world questioning whether Britain could pay its way.

ANDREW MARR:

So when PricewaterhouseCooper for instance says that your policies will result in a million people losing their jobs and others warn about the dangers of the UK economy simply not being strong enough to rebound again after this, you push all of that to one side; you say I'm not going to flinch, I'm not going to change?

GEORGE OSBORNE:

Andrew, what is "this" - the this you …? The "this" you refer to is the fact we have the largest budget deficit in the developed world. So when I go to the IMF - as I did last weekend - when I go to the G20 in Korea, which I'll do immediately after the Spending Review, I sit round the table with all those other countries representing the country with the largest budget deficit. I didn't create this situation; the Labour predecessors did that.

ANDREW MARR:

Right.

GEORGE OSBORNE:

But I do have to sort it out. And if we were not to have a credible, serious approach to dealing with that deficit, so we're not still here in four or five years time talking about rising debt, talking about what more is going to be cut - if I'm going to deal with that situation, we have to …

ANDREW MARR:

You have to do it now.

GEORGE OSBORNE:

… we have to do it now. Now, look, the plan that I will set out on Wednesday does not take effect overnight. It's a four year plan. There is…it's staggered through those four years. I think it's a sensible plan and almost every external observer of the British economy, and indeed British business (who after all are going to create those jobs we were talking about), all of them have looked at it and said that is the right plan.

ANDREW MARR:

You talk about the plan. You're off to Chequers now. Is the plan actually complete? Have you finished all the negotiations?

GEORGE OSBORNE:

Yes, the plan is complete. We're putting the final touches to it today with the Prime Minister and Nick Clegg and Danny Alexander who I should say has been an absolutely brilliant Chief Secretary to me during this process. And the fact actually you've two political parties …

ANDREW MARR:

More Tory than the Tories. That's what the Liberals say about him

GEORGE OSBORNE:

(over) You know I think people should reflect on the fact that two political parties have worked together on this problem to sort out the mess that one political party left behind. And the fact it's a coalition, I think has made this process stronger, more collegiate, less of the kind of sofa government and broken mobile phones that you saw under the last government.

ANDREW MARR:

Well let's turn to some of the details. The military issue has been clearly very, very difficult and you and Liam Fox have had a bit of a problem with that. Are we going to see thousands of frontline soldiers going?

GEORGE OSBORNE:

Well, look, what I first would say it has been the most difficult of all the budgets, and actually the problem Liam Fox and I have had has not been with each other, but with the legacy that we've inherited and we both work very closely together in trying to sort it out.

ANDREW MARR:

But a lot of this has been fought through the newspapers which are partly culpable.

GEORGE OSBORNE:

Well, look, this is a budget that was £38 billion overcommitted. Even in the last year of the Labour government, it overspent three and a half billion pounds. I mean those are huge sums of money - much greater than the entire budgets of some other government departments.

ANDREW MARR:

So let's turn to the future.

GEORGE OSBORNE:

Well just on defence, what we I think have come up with is a settlement that first of all absolutely secures the funding for the troops in Afghanistan to make sure they get everything they need to do the job, the very dangerous job that we ask of them. But, second, we make sure that we are buying the right equipment and having the right forward thinking about how Britain is going to project power in the world over the next couple of decades and be a force for good in the world over the next couple of decades. And finally, if you allow me to say this, Andrew, not just in terms of military power - you've had Melinda Gates on this programme - but in terms of our development assistance to the rest of the world and indeed our foreign policy and diplomatic presence.

ANDREW MARR:

And you're keeping with that. So let me just return …

GEORGE OSBORNE:

(over) So a coordinated approach, well-funded …

ANDREW MARR:

(over) I understand that.

GEORGE OSBORNE:

… for the task that lies ahead.

ANDREW MARR:

Let's just return, however, to the question which is 7,000 fewer troops?

GEORGE OSBORNE:

Well, look, I'm not going to pre-empt what the Prime Minister is going to set out at the beginning of this coming week on security and defence, but I think we've made the right choices and I think …

ANDREW MARR:

(over) Even thousands, thousands of troops?

GEORGE OSBORNE:

Look, I'm not going to pre-empt what the Prime Minister's going to set out, but people can see that we'll have an army of the appropriate size for the task that we are asking them to do, including this very, very dangerous task in Afghanistan.

ANDREW MARR:

And nothing could be more absurd, could it, than to order two huge aircraft carriers with no aircraft to go on them?

GEORGE OSBORNE:

Well I have to say of all the most difficult decisions we faced, this has been the most difficult. These aircraft carriers ordered by Gordon Brown and Alan Johnson when he was in the cabinet, are…we were signed up to a contract we couldn't get out of. It was not obvious what planes will fly off these things as they're being built. It would literally cost us, I promise you - we went into this in some detail - more to cancel the things than to go ahead and build them. So you know it is…in a way it's a metaphor for everything that went wrong under the Labour government.

ANDREW MARR:

But I can see a case for aircraft carriers with aircraft on them or no aircraft carriers. I can't see a case for aircraft carriers with no aircraft on them.

GEORGE OSBORNE:

Well we have I think resolved that.

ANDREW MARR:

You have a plan?

GEORGE OSBORNE:

We have a plan.

ANDREW MARR:

So there will be aircraft on them?

GEORGE OSBORNE:

We will set out how that's going to take place over the next couple of days. But I think actually we have resolved an almost impossible conundrum with these aircraft carriers which were a metaphor of every bad decision taken under the Labour government, and we will have …

ANDREW MARR:

They will have aircraft on them?

GEORGE OSBORNE:

They will be what we want them to be - vehicles for projecting British power abroad …

ANDREW MARR:

Helicopters then?

GEORGE OSBORNE:

No. No, no, you'll just have to wait and see.

ANDREW MARR:

Okay.

GEORGE OSBORNE:

They will be aircraft carriers, let's say. They will live up to their name.

ANDREW MARR:

Alright.

GEORGE OSBORNE:

But we will explain in due course.

ANDREW MARR:

Alright. Let me turn to another big area, which is welfare. In retrospect, the child benefit announcement probably caused more fuss than you expected, didn't it?

GEORGE OSBORNE:

Well, look, I knew full well that getting up at the Conservative Party conference and saying that I've got to take child benefit away from higher rate taxpayers was not necessarily going to be warmly received by everyone.

ANDREW MARR:

Have you resolved the unfairness question?

GEORGE OSBORNE:

The unfairness question is this. Is it fair at a time like this when I've got to make all sorts of other decisions, including decisions in welfare, to tax people watching this programme on £10,000 a year, £15,000 a year, £30,000 a year to pay the child benefit of someone earning £50,000 a year? Now I judged …

ANDREW MARR:

Have you resolved the double income/single income problem?

GEORGE OSBORNE:

Well what I've sought to do is provide a simple system that doesn't abolish child benefit and create some vastly new means tested system, but basically keeps child benefit for the four-fifths or more of the population who claim it very easily, but does remove it from higher rate taxpayers in a simple way, through the tax system. It is …

ANDREW MARR:

Can I just ask you very simply. Are you coming…revisiting the issue of the double income family and the single income at all?

GEORGE OSBORNE:

No, I'm not …

ANDREW MARR:

You're not?

GEORGE OSBORNE:

I'm not proposing to ….

ANDREW MARR:

You're not, okay.

GEORGE OSBORNE:

Look it's very important, Andrew. At a time like this, it would be totally unreasonable to leave the top fifth of the population unaffected by some of the welfare changes that I've got to make.

ANDREW MARR:

So those who've got to make the married income tax allowance …

GEORGE OSBORNE:

(over) It's got to, it's got to be fair. You know it has to be fair acro… We are all in this together ...

ANDREW MARR:

(over) But a lot of people say it's not fair.

GEORGE OSBORNE:

… and we've got to demonstrate.

ANDREW MARR:

Well people say it's not fair because if …

GEORGE OSBORNE:

Look, you could argue that it's deeply unfair that the country has been left in this situation with this enormous budget deficit …

ANDREW MARR:

(over) No, but on this specific issue …

GEORGE OSBORNE:

(over) …and even more unfair if we didn't deal with it now and leave it to future generations.

ANDREW MARR:

Yuh, but on this specific issue, your own colleagues think, a lot of your own colleagues think that the way it's been done is patently unfair. A lot of your own supporters, Tory voters think the same.

GEORGE OSBORNE:

I just say this. It would be unfair to ask at a time like this people on £15,000 or £20,000 a year to pay the child benefit of the top fifth of the population or less who claim, who have the higher rate tax…

ANDREW MARR:

(over)And you can't smooth out the problem between double income and …

GEORGE OSBORNE:

Well, as I say, this is the simplest way of doing it without abolishing child benefit and creating a very complex means test.

ANDREW MARR:

Are you going to look again at child benefit? I'm thinking of stopping it at 16.

GEORGE OSBORNE:

There's a lot of speculation about the other welfare changes that might be announced next week. I'm not going to go into those because you'll pull me down a path, line of questioning that takes me …

ANDREW MARR:

More than happy to do so.

GEORGE OSBORNE:

So you know don't read anything into that. That doesn't mean …

ANDREW MARR:

Okay.

GEORGE OSBORNE:

Don't necessarily believe everything you read in the newspapers at the moment. But I don't want to get into further specific measures. What I have sought to do is make sure that we are getting as much as we can out of welfare and waste in government in order to ensure that there are real increases in the healthcare, in schools and the provision we have for early years, and indeed in the big infrastructure investments that will help our economy grow. And we have got a set of proposals in that area as well.

ANDREW MARR:

Well you yourself have raised the question of benefit cheats - people who are defrauding the benefit system - and suggested that there is going to be a much tougher regime. I mean I have to say politicians over the years keep saying this. Do you really have an answer for that and what is it?

GEORGE OSBORNE:

Yes, of course politicians, Labour politicians have said this over many years and nothing ever happened. But Ithink because of the fiscal circumstances, the situation of the budget, you know we can't afford to waste any time on this anymore. There is £5 billion a year going in fraud and error in our benefit system and we have a very, very tough set of proposals that will be set out tomorrow to impose new sanctions, including everything from a £50 fine if you make an error on your form that you could reasonably have avoided because obviously we get a lot of people claiming, oh well you know …

ANDREW MARR:

Made a mistake.

GEORGE OSBORNE:

… we made a mistake. So a £50 fine for an error that could reasonably have been avoided. Up to, if you are caught for the third time of committing fraud, you will have your benefits removed from you for three years. And that is a perfectly reasonable deal with people. We have a benefit system. I want it to be on a sustainable footing for the long-term, but it has to go to the people who need it because the people who pay for it these days demand no less.

ANDREW MARR:

So you really are going to crack the whip on this. What about invalidity benefit? Do you really believe that you can get hundreds of thousands of people back into work?

GEORGE OSBORNE:

Well you know this is a social …

ANDREW MARR:

Again people have talked about it for years.

GEORGE OSBORNE:

Well, yuh, but it's a social tragedy that we leave people on this benefit unable to get back into the workplace. We are going to give them more intensive help. But if frankly if they are capable of getting a job and capable of looking for work, they should be on the same benefit as their next door neighbour who is also looking for work. I think that is perfectly fair. Otherwise you park a couple of million people on invalidity benefit, shut the door and forget about them, and that's not what this government's prepared to do.

ANDREW MARR:

Okay.

GEORGE OSBORNE:

It's part of a major welfare reform, which means that it always pays to work. That is what we are proposing.

ANDREW MARR:

Alan Johnson said that he thought a lot more money could be taken out of the banking sector. A lot of members of the public think squeeze the banks harder. That's where the money is.

GEORGE OSBORNE:

Look, I completely understand people's anger on this. I note that Alan Johnson was in a cabinet five months ago that didn't do some of the things he's talking about, and that's because there are lots of complicated issues here. What we have done is introduce for the first time, in opposition to the … from opposition from the Labour Party, we have introduced a permanent bank levy and I will be publishing the legislation on that next week. But we are also going to be looking at the code of practice that the banks were supposed tosign up to to make them good taxpayers. Now actually Alan Johnson and his party announced this last year. I've looked at … (Marr tries to interject) Can I just finish? I've looked at this code of practice. Only four of the fifteen major banks have signed up to it and I'm going to be requiring by November that all the banks sign up to the thing that the last government said they were going to be signed up to …

ANDREW MARR:

And pay more tax as a result?

GEORGE OSBORNE:

Well and pay what is due - both the …

ANDREW MARR:

And have you got a sanction?

GEORGE OSBORNE:

Well both the spirit of the tax law, as well as the letter of the tax law. That is what we are asking. Of course we've got a sanction, which is …

ANDREW MARR:

What's the sanction?

GEORGE OSBORNE:

Well the sanction is an Inland Revenue which is going to have enhanced capability to make sure that people pay what is due. And that's not just true of banks. That is also true of rich people who avoid tax because they are just like the benefit cheats at a time like this.

ANDREW MARR:

Does that include people like some of your colleagues who have shifted money into companies with their wives …

GEORGE OSBORNE:

I'm talking about tax evasion. Tax evasion is totally unacceptable at a time like this.

ANDREW MARR:

But what about the rich people who avoid tax?

GEORGE OSBORNE:

It's unacceptable at the best of times. It is immoral at a time like this. We are actually, in a period when we are cutting quite a lot of budgets, we are increasing the budget here of the inspectors who go after the tax accounts of the richest people and the richest companies to make sure that they are paying their fair due too.

ANDREW MARR:

And one final specific, worried an awful lot of people. Are we going to see a cut in frontline policing?

GEORGE OSBORNE:

Well I am hoping that we actually improve the policing that we get …

ANDREW MARR:

(over) But in terms of numbers.

GEORGE OSBORNE:

… through workforce reforms. And you'll have to wait and see what the Home Office settlement is. But the priority here has been to target waste and welfare, to invest in our healthcare, to give real increases in the school budget, and to invest in the things that are going to make our economy strong. Projects like Crossrail, which will go ahead; projects like the Mersey Gateway which is going to go ahead …

ANDREW MARR:

One final …

GEORGE OSBORNE:

… projects like the Diamond Synchrotron, which is a key science project.

ANDREW MARR:

(over) Are you going to be closing prisons?

GEORGE OSBORNE:

Look, we have got to make some tough decisions, but the priority …

ANDREW MARR:

Prisons are going to close, aren't they?

GEORGE OSBORNE:

…. the priority is healthcare, children's education, the early years provision - particularly of some of our poorest - and the big economic infrastructure projects like Crossrail, Mersey Gateway, the Synchrotron, Broadband …

ANDREW MARR:

They're going. Okay.

GEORGE OSBORNE:

Those things that are actually going to help us get out of this stronger and able to find out way in the world.

ANDREW MARR:

Politicians always talk about what they're going to spend money on, not what they're going to cut. But thank you very much indeed, Chancellor.

INTERVIEW ENDS




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