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Transcript John Major interview

PLEASE NOTE "THE ANDREW MARR SHOW" MUST BE CREDITED IF ANY PART OF THIS TRANSCRIPT IS USED

THE ANDREW MARR SHOW

INTERVIEW:

SIR JOHN MAJOR

FORMER PRIME MINISTER

OCTOBER 9th 2011

ANDREW MARR:

Tumbling markets, growth figures flat as Suffolk, the Bank of England sounding like Private Frazer from Dad's Army, the Eurozone in crisis, Greeks tragic, and here the Chancellor says a fast plan to rescue the Euro will be the single biggest boost for Britain even though we're not a member. Why are we not a member? Partly because of Sir John Major who as Prime Minister negotiated to keep Britain's options open. And he's with me now. Welcome.

SIR JOHN MAJOR:

Good morning.

ANDREW MARR:

I suppose I should start by asking you, given that you're in the world of finance and so on in the private sector as well observing these things, how bad you think it's going to get?

SIR JOHN MAJOR:

I think it's pretty serious, but I think if you can reach a conclusion to the Eurozone crisis you'll change the level of confidence and I think that will make a material difference. But at the moment, you have the Eurozone pretty flat as an economy, you have America flat, you have the Chinese economy slowing and we don't know how much it will slow, and you have the British economy teetering between no growth and tiny growth. So plainly it's serious. And it is a different sort of recession to any we've had before because of the debt overhang.

ANDREW MARR:

Because you …

SIR JOHN MAJOR:

So, yes, I do think it's very serious.

ANDREW MARR:

You had a recession, which you had to grapple with. But when Mervyn King says this is potentially worse than the 1930s, he's not scaremongering?

SIR JOHN MAJOR:

Well I think he's looking at the scale of debt. I mean if you actually look at the United Kingdom as an example, in 1997 - to pick a date at random - we had a national debt of about 350 billion. By 2010, it was 900 billion; and on unchanged policies, by 2014 it would be 1.4 trillion. So you begin to see the scale of the problem and the fact that it's absolutely unavoidable that you make changes in order to bring down that level of debt because that overhang could be with us otherwise for generations.

ANDREW MARR:

Is the truth that in the West we're all going to have to work harder and earn less and consume less for a very long time to come?

SIR JOHN MAJOR:

Well certainly for a while. I don't think there's any doubt about that. There's no point in pretending the situation is suddenly going to magically come good with a bit of growth. I'm afraid we need a good deal more than that. And we're going to have to restructure a great deal of what is happening - not least, I may say, in the Eurozone, which is crucial to us because we're not part of the Euro, as you rightly say - I opted out in the Maastricht Treaty - but the Eurozone is 40 per cent of our exports and the rest of the European Union as a whole is 50 per cent of it. So their health is crucial to our health.

ANDREW MARR:

Absolutely crucial, which George Osborne was saying. Now, as I understand it, there are three possible things that might happen to resolve this. One is that the Germans just agree to a vast new transfer of money, way beyond what's been agreed for. That seems very unlikely given the state of German public opinion, doesn't it?

SIR JOHN MAJOR:

I think it's very unlikely. And the Germans have expressly been told that they won't move towards a transfer union, which essentially is what you're talking about.

ANDREW MARR:

So let's put that to one side. There are two other obvious options. One is that the Eurozone fractures or breaks up around the edge and we go back to hard cores and soft cores that you remember very well. And the other is what Barroso said - is that we go to a full, integrated, single European economy, in effect a super state.

SIR JOHN MAJOR:

I think it's extremely unlikely that the European Union will fracture with nations dropping off the edge.

ANDREW MARR:

You don't think Greece will go or default?

SIR JOHN MAJOR:

It's conceivable.

ANDREW MARR:

It could default inside the Euro of course, couldn't it?

SIR JOHN MAJOR:

Well I'll come to that in a moment. I think that's exactly what will happen and should happen. But I think it is unlikely that the European … that the Eurozone will toss out a member. It's conceivable that it could happen, but it would certainly be against their wishes. I think by far the most likely proposition … Firstly you have to look at the short-term problem and then the point you're touching on, the longer term problem. In the short-term, the banks need to be recapitalised …

ANDREW MARR:

Yes.

SIR JOHN MAJOR:

… and Greece needs to default. The sooner that happens and Greece defaults, the sooner you remove something from the overhang in the market.

ANDREW MARR:

Can I just stop you there and ask what it would mean for Greece to default inside the Eurozone? What would actually happen?

SIR JOHN MAJOR:

Well what would happen is that if Greece defaulted and couldn't pay its debts, all the Greek bonds that are held in other banking systems across Western Europe would suddenly have no value. You could as a knock-on effect create a banking crisis in Western Europe …

ANDREW MARR:

(over) Yes, French banks and German banks have a lot of these …

SIR JOHN MAJOR:

(over) French and German banks have most of it. So that would be absolutely catastrophic if that happened. So the Greeks mustn't default until the Western European banks are in a position to absorb any losses there may be without creating a banking crisis.

ANDREW MARR:

So just to be clear. The taxpayers give the banks enough money, so that when the default happens the banks don't go bust?

SIR JOHN MAJOR:

Well I think the way they may do it … I think there are two things they could do. The first thing I think they could do is turn the European structural facility from a structural facility into a bank. Give it a banking licence, let it leverage. That is …

ANDREW MARR:

(over) It's a new European Central Bank in effect?

SIR JOHN MAJOR:

No, no, it would be quite separate from the European Central Bank. Turn it into a bank. Let it borrow money as banks normally can from the European Central Bank and either buy up the Greek bonds to remove the danger, the contagion from the Western banks, or use the resources to recapitalise the banks so they can bear the losses. That seems to me to be the first thing that has to happen. And then it would be thoroughly desirable, in my view, to get the Greek default out of the way. It's a terrible overhang in the market.

ANDREW MARR:

Just get rid of it.

SIR JOHN MAJOR:

It's partly priced in. Let's get it done and then we can move onto the longer point, which is the one you raised.

ANDREW MARR:

Well when you were Prime Minister, of course, your argument against the Euro project was that you couldn't have, you didn't think, a successful single currency that didn't have a single taxation system and a single economy and, therefore, a single treasury; and therefore were we to be part of that, we would entirely lose our sovereignty.

SIR JOHN MAJOR:

There were three arguments. The first was that if you have a monetary union without a fiscal union, it's like a two-legged dog.

ANDREW MARR:

Yuh.

SIR JOHN MAJOR:

The second …

ANDREW MARR:

You can't have money without the taxation system for people?

SIR JOHN MAJOR:

Correct. The second argument … At Maastricht, we produced some safeguards. Although I opted out at Maastricht, we produced some safeguards. One of them was that no European nation would have a fiscal defict of more than 3 per cent. And the second was that before the Euro was formed, the economies of those nations going into the Eurozone should converge. And by that piece of jargon, we meant they should operate at broadly the same level of efficiency. Now that didn't happen …

ANDREW MARR:

Fat chance, yeah.

SIR JOHN MAJOR:

… it didn't happen. And in the late 90s, the French and Germans began to worry. They said well will the Eurozone ever happen? So they went into the Eurozone without the convergence and then …

ANDREW MARR:

(over) Yuh, and that was the mistake.

SIR JOHN MAJOR:

That was a tragic mistake. And it was foreshadowed. It shouldn't have happened under the Maastricht Treaty. The second thing that didn't happen was that when the Germans and the French went beyond the 3 per cent deficit, the Commission took no action against them and everybody else did too, so you got this burgeoning level of debt that began to spread everywhere.

ANDREW MARR:

So this suggests very strongly that the Eurozone as it is now cannot survive. There has to be a radical change.

SIR JOHN MAJOR:

It will have to change. I think it will have to change. I …

ANDREW MARR:

Can I just follow on from what you were saying though about the fiscal union.

SIR JOHN MAJOR:

That's what I was going to talk about now.

ANDREW MARR:

Well because when you were Prime Minister a lot of the more hardcore eurosceptics in the Conservative Party were saying you cannot maintain your sovereignty if you're involved in this kind of union. And they got a lot of abuse - you know the flapping of white coats and so on.

SIR JOHN MAJOR:

(over) No, no, that …

ANDREW MARR:

Well …

SIR JOHN MAJOR:

The flapping of white coats was on a quite separate matter. The substance - and I don't withdraw the remark …

ANDREW MARR:

Right.

SIR JOHN MAJOR:

… the substance of the argument is exactly the same as I advanced at Maastricht; that unless you …

ANDREW MARR:

(over) But the majority of these critics - the sort of John Redwood's and so on - were right, were they not?

SIR JOHN MAJOR:

They were partially right, but only partially right, and I will come to what the situation is as I saw it. The need for fiscal union was something we foresaw at Maastricht, which is why we opted out at Maastricht. That was right and is right. What is now I think going to happen is that, albeit in a crab-wise fashion, I think the Eurozone members will have to move towards a fiscal union. I don't think they're suddenly going to say we're going into full-scale fiscal union. It needs a treaty and all sorts of other things. Let me just continue for a second. What I think they will do is produce legislation within the European Union that makes the control of fiscal deficits, the harmonisation of tax and matters like that much more controlled from the centre, so they will be moving towards a federal state within the Eurozone.

ANDREW MARR:

Yes.

SIR JOHN MAJOR:

Within the Eurozone.

ANDREW MARR:

Now, can I just …

SIR JOHN MAJOR:

And they will be moving to it out of failure, not out of success.

ANDREW MARR:

Yes.

SIR JOHN MAJOR:

That is the point. And that then gets … (Marr tries to interject) Sorry, it's relevant what I'm about to say. It then gets to the position where you have an inner core within the Eurozone that is operating much more deeply and closely together than the rest of the European Union. And if you remember in the 1990s, Douglas Hurd and I both advocated …

ANDREW MARR:

Two phase.

SIR JOHN MAJOR:

Well we called it variable geometry …

ANDREW MARR:

(laughs) Alright.

SIR JOHN MAJOR:

… and we saw the option of a much looser European Union in which people opted in rather than opted out.

ANDREW MARR:

Yes.

SIR JOHN MAJOR:

And it wasn't such a tremendously prescriptive union, which everybody had to be part of. And …

ANDREW MARR:

You could be a loose member or a tight member in effect.

SIR JOHN MAJOR:

… and that is the direction it's slowly …

ANDREW MARR:

And that's what's happening.

SIR JOHN MAJOR:

… slowly, but that is the direction over the next decade in which I think we're going.

ANDREW MARR:

However, before we get there quite clearly there is going to have to be a new treaty, which now means a referendum in this country, and which potentially is an agonising choice for this country, isn't it?

SIR JOHN MAJOR:

Well there won't necessarily have to be a treaty in this country for fiscal union. It is conceivable …

ANDREW MARR:

(over) But I think any treaty would now trigger a referendum.

SIR JOHN MAJOR:

Any treaty would do, but in terms of fiscal union it is conceivable there will be a treaty just among the members of the Eurozone. So don't overlook that possibility.

ANDREW MARR:

So we could have the Conservative Prime Minister saying to the country this is a treaty for a federal Europe, but for a German and French federal Europe and we should let them get on with it in effect?

SIR JOHN MAJOR:

I think that is conceivable. Quite how this will … I mean there are dozen different ways this could unwind and, frankly, nobody can be certain which way it will go at the present time. But that is certainly possible - that there would be a fiscal union among the Eurozone members. They would have their own treaty. But at some stage, there will be another treaty because if there's fiscal union in Europe, it changes our relationship to Europe.

ANDREW MARR:

Exactly.

SIR JOHN MAJOR:

That is the fundamental point.

ANDREW MARR:

And does that therefore mean finally that this is the opportunity to repatriate some powers from Europe?

SIR JOHN MAJOR:

Well I think it gives an opportunity for two things. Firstly it gives us an opportunity to negotiate for the looser form of Europe that I would have liked to have seen in the 1990s and we got no traction when Douglas Hurd and I argued for that then. I think it presents that opportunity. And, secondly, I think there are some areas that are worth looking at. This is not anti-Europeanism or euroscepticism. There are some areas that it would be worthwhile seeking to repatriate.

ANDREW MARR:

For example fishing? Fishing lands?

SIR JOHN MAJOR:

Well fishing is one. I think there are elements of employment law that used to be in the Social Chapter. It's now spread. You recall I opted out of that in 1992 because I saw it as a job destroying mechanism. Now it has changed. But the things like the Working Time Directive, which I think is a very foolish piece of legislation, we could look at repatriating part of it.

ANDREW MARR:

You would argue that that would allow us to get more people into employment in this country if we could get rid of it.

SIR JOHN MAJOR:

(over) That's the purpose.

ANDREW MARR:

It has been said that these things are years and years away …

SIR JOHN MAJOR:

(over) There are two ways …

ANDREW MARR:

(over) … but they could be quite soon, couldn't they? We could get an opportunity.

SIR JOHN MAJOR:

They could be much more speedy. They could arrive much more speedily than we previously thought. So I think that is one area we could repatriate. Clearly financial services is another. There's been a lot of talk about the financial transactions tax. Now I personally don't think that will ever happen for a range of complex reasons. But even so, financial services is crucial to the wellbeing of the British nation. It is what drove our growth - overdrove it as it happens - but drove our growth in the last twenty years or so, and we really don't want a whole series of restrictive notions damaging our financial structure in this country.

ANDREW MARR:

(over) So in effect what you're saying to David Cameron …

SIR JOHN MAJOR:

(over) And of course fishing, and of course fishing is certainly an option.

ANDREW MARR:

So what you're saying to David Cameron in a sense is this is a terrible crisis that we're facing, but it's also a huge opportunity where Britain could decisively move into the European argument and bring back to this country some of the powers that we lost in the past?

SIR JOHN MAJOR:

Europe changed fundamentally when the Europeans ignored the safeguards in the Maastricht Treaty and proceeded to an unsafe Eurozone, which they did in 1999 without any bark of protest from the United Kingdom. That changed it. It changed everything because the Eurozone was no longer going to be a stable instrument. We were going to be outside it …

ANDREW MARR:

Sure.

SIR JOHN MAJOR:

… but it could have been stable and it wasn't. And that was a significant change. And now I think there is an opportunity. I don't see this as a eurosceptic attack on Europe. I see this with twenty-seven nations in the European Union …

ANDREW MARR:

It's got to be different.

SIR JOHN MAJOR:

It has to change.

ANDREW MARR:

(over) Can I just ask …

SIR JOHN MAJOR:

(over) It cannot be the same as fifteen nations or six.

ANDREW MARR:

Can I just ask you a couple of questions about where we are now in this country. Famously George Osborne described quantitative easing in the past as "the last resort of a desperate government." Do you think it can work?

SIR JOHN MAJOR:

(laughs) Well it isn't George who's just quantitatively eased, as it happens. It's the Governor of the Bank of England.

ANDREW MARR:

Yes, sure.

SIR JOHN MAJOR:

And I think the Governor is right to do so. When you look at what is happening externally, when you consider how much of our economy is driven by exports and you then see what's happening to our markets overseas, I think the Bank of England are right to quantitatively ease. There's not a serious inflation …

ANDREW MARR:

(over) The worst financial crisis ever, he says, doesn't he, Mervyn King?

SIR JOHN MAJOR:

Well it's very serious certainly.

ANDREW MARR:

Yuh. And …

SIR JOHN MAJOR:

So I think he is right. But the more valuable might actually be the proposals that the Chancellor put forward himself to direct money specifically to parts of industry.

ANDREW MARR:

Yes. And I must ask you about the story on the front pages today. Liam Fox clearly in some trouble over meetings and advisers and all of that. You have lots of experience of cabinet ministers in trouble with the newspapers and how quickly you move to act to kill this off. What's your verdict on this one?

SIR JOHN MAJOR:

It's extreme… Well firstly it's extremely difficult to handle these. Either natural justice requires you wait a long time and you're then said to be incapable of making decisions if you operate under natural justice, or you move too speedily and you're said to be ruthless. So I don't know what the situation is. The Prime Minister has asked for the facts to have a first look on Monday …

ANDREW MARR:

Yuh.

SIR JOHN MAJOR:

… and I think that is right.

ANDREW MARR:

That's right. Because there's a momentum to these stories, as you know.

SIR JOHN MAJOR:

There is.

ANDREW MARR:

They build and build and build, the pressure …

SIR JOHN MAJOR:

(over) But from the Prime Minister's perspective, he has to balance natural justice and the truth rather than the gossip, the rumour and things that may be true but I have no idea whether they are or not.

ANDREW MARR:

Sir John Major, for now thank you very much indeed for joining us.

SIR JOHN MAJOR:

My pleasure.

INTERVIEW ENDS




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