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The Chancellor of the Exchequer, Gordon Brown MP
The Chancellor of the Exchequer, Gordon Brown MP
BBC BREAKFAST WITH FROST INTERVIEW:

GORDON BROWN, CHANCELLOR OF THE EXCHEQUER DECEMBER 2nd, 2001

Please note "BBC Breakfast with Frost" must be credited if any part of this transcript is used

DAVID FROST:
Well more now on the issue of the week, the Chancellor's decision to dole out more money to the public services. Higher taxes look to be on the cards but should Gordon Brown be looking at other funding options? In just a moment we'll look back at how the Liberal Democrat leader Charles Kennedy tackled Tony Blair on health spending in the Commons this week, but first let's remind ourselves how the man himself, the Chancellor, announced this momentous shift in government strategy.

DAVID FROST:
Well there we are, that was the point of the Chancellor's statement and now we're delighted to have the man of the week here. Gordon, thank you for being with us.

GORDON BROWN:
Good morning.

DAVID FROST:
Starting with that quote there, the famous quote that we just played there, the significantly higher share of national income, and putting it together with Ed Ball's briefing and Tony Blair's interview in the Independent on Sunday today, that statement does mean some tax rises.

GORDON BROWN:
I don't rule it out and that's what I've said during the course of this week. What we've done since 1997, we made the Bank of England independent, we've rearranged our fiscal policy, we've got huge savings from debt interest, huge savings from unemployment, we're getting better value for money from our public services, but we now have the Wanless Report, it says that there is a big underfunding gap, not over five years but over 50 years in the National Health Service, we've got to wait for the final report of that and then the decision that we will have to make is will we get value for money for extra investment in the health service. And it will be tied to reform and tied to results, and that will be the agreement that we will have to come to when we make our final spending decisions.

DAVID FROST:
That's right. But you don't rule out higher taxes, and - except obviously you, because of your past prejudice, you rule out income tax going up and you rule out, presumably in addition to that, VAT on a number of things, like children's food that sort of thing.

GORDON BROWN:
We will keep every promise that we made at the General Election, every promise that is in our manifesto. And the most important thing I'm saying this morning is that we will not make these decisions unless we are satisfied that the money will actually go to securing a better service for individual patients and right across the country for those people who depend on the National Health Service.

DAVID FROST:
But you have -

GORDON BROWN:
And that's what we've got to look at over the next few months.

DAVID FROST:
But you have ruled out, in terms of this debate, you have ruled out hypothecation haven't you? Or ring-fencing?

GORDON BROWN:
Well there's a debate about hypothecation. Pure hypothecation would make the health service the hostage to what might happen to an individual tax during the economic cycle, so if you had the health service linked to one tax or two taxes, then if there was a change in behaviour or if something happened to the economy, that would be the opposite of what the health service needed, which is sustainable, long term, guaranteed funding. But there is a debate about linking the taxes you pay more closely to the services you receive, and that is a debate that, rightly, is one that will go on.

DAVID FROST:
So that is the one you've got an open mind on?

GORDON BROWN:
Well yes because people want to see that there is value for money for the taxes that they're paying, they want to see that the money that they're paying is linked to an improvement in service, and that is a debate that will go on. Yes, it will go on. But pure hypothecation, which is this linking of one tax to the, perhaps, the fate or fortune of the economic cycle, is really not acceptable.

DAVID FROST:
And in terms of the other thing, of the funding, you would seem to have ruled out any alternative to centrally funded state tax funding. I mean you've ruled out anything that expands the role of the private sector.

GORDON BROWN:
The private sector is doing far more for the health sector, the question is, however, in terms of funding of the health service. Mr Duncan Smith I heard this morning saying that he was prepared to contemplate charges for visits to doctors and hospitals, he said he's prepared to contemplate private medical insurance and giving, for example, tax reliefs for that. Now we've looked at all these things, in fact Wanless has looked at all these things. What are the advantages and disadvantages of these individual systems? Well, if you have a system of charges, it only raises a fraction of the amount of money that the health service needs, even the best system of charges has to have massive exemptions, like prescription charges have exemptions. If you look at private medical insurance, when we had tax relief for private medical insurance, what happened was there was very few extra people took it and it was a huge additional cost that the government had to pay in tax relief for people who already had private medical insurance. So it cost huge amounts of money but it didn't yield the results. If you look at social insurance, which is the French model, actually, it's moving more and more towards a tax, revenue based system in France, and also at the same time if you go to the doctor in France, in addition to your social insurance premium, you pay a charge for your visit, you pay a charge for your hospital care, and many people in France have big doubts about that system as well.

DAVID FROST:
But in terms of matching the eight per cent, the famous pledge, matching the eight per cent in Europe and so on, depending on whether you put it in the most favourable light and say that it's an unweighted average and all of those arguments that you're, that you can say that all that's needed is two billion more a year. Taking other people's calculations, from the King's Fund and others, they say there's a black hole of ten billion, or a black hole of 17 billion - or in one case a black hole of 30 billion. How much extra do you need to fill up your black hole?

GORDON BROWN:
Well that will be what the Wanless Report recommends. How much money does the health service need - not just for a year, but for five years, ten years, 15 years. We are the first government to have this long term review of funding of the National Health Service so that people know the full facts. Now what we've done over the last few years, and partly since Tony Blair's appearance on the Frost programme when you asked him these questions, health service spending has gone up from 6.8 per cent of national income, health spending, to 7.1 to 7.3 to 7.5 and it will go up to 7.6 per cent, as Tony Blair said in his interview today in the Independent, that is moving towards the European average. The main question, however, for the future is, what does the health service need for five years ahead, ten years, 15 years ahead, and we will get the Wanless Report and he will be looking up the British needs for the future and then we'll have to make a judgement. And that's what the debate's going to be about.

DAVID FROST:
When you ruled out that income tax, obviously, and the VAT thing, do you rule out having to lift the ceiling on National Insurance to fund this?

GORDON BROWN:
I made my pledges at the election on income tax and on VAT, and I made it absolutely clear at the election that no chancellor going into budgets will make specific pledges on other issues. Now that is a matter for debate and for discussion and obviously you wouldn't expect me to get into the details of a budget - much as it's tempting of course to talk to you in the Frost programme rather than to talk to Parliament. But no, these are matters for the budget and for the spending round and I couldn't be drawn into that. What I will say, we will keep all our promises. If we have to make decisions on taxation, they are linked to results, and reform, and the most important message that I think you'll see from the Sunday papers this morning, is that the command and control health service is really not what we're about, it's about local devolution of power, it's about people knowing how different hospitals are performing and whether we're getting value for money. And when I see the costs of operations, sometimes 50 per cent higher in some hospitals than in others, and when I see that the waiting times in some hospitals are a lot less than in others, then you know that there's a lot of reform that started with the ten year plan - and Alan Milburn and Tony Blair who led the ten year plan have done a great job on that, and that is moving forward - started with the ten year plan but there's a lot more reform and we have got to be satisfied when we make the decisions about the budget and about the spending round, that we're getting reform and results, and we have got to be sure that we can tell the people of this country they're going to get value for money, for whatever extra investment is put into the National Health Service in the future years by whatever means.

DAVID FROST:
And what Charles Clarke's words this week, Gordon, when he said in terms of making a determination of whether we should or shouldn't go into the single currency, the situation, he said, is that the political advantages are so strong that if the economic advantages are just 50/50 we should still go ahead because we would have 50/50 there and advantages there. You don't agree with that?

GORDON BROWN:
Well, I think Downing Street made a statement yesterday on this matter. We've said in the 1997 statement that the results have got to be clear and unambiguous, the five tests have got to met, we're doing an assessment based on technical and preliminary work which is of course being undertaken, the assessment has not yet started, we will have the results for the people within two years of the start of the parliament and then there will be a national debate and a decision will have to be made.

DAVID FROST:
Yes but that, but that idea, you said it has to be clear and unambiguous, is anything in economics unambiguous?

GORDON BROWN:
(LAUGHS) I think people have got to be satisfied that this is in the economic interest of the country and we've always said that the tests about employment, about investment, about financial services, about flexibility, about the durability of convergence, and that these are what the tests are about, to establish that it's good for jobs and investment and business and the financial services, these tests have got to be met and that's why people will want to know that the results of that test are clear and unambiguous, yes.

DAVID FROST:
Obviously everyone is fascinated, you spoke out in The Times about the relationship between yourself and Tony Blair and someone put it this way, it's a relationship that works really well but feeds on a certain creative tension.

GORDON BROWN:
Well I think we can laugh about it as well, when I'm talking to Tony Blair we can laugh about what people say about us and I've known Tony Blair for 18 years, I've probably talked to him almost every day for 18 years, we continue obviously to talk sometimes three or four times a day about the things that matter and it is a very strong working relationship and has been for all that period of time.

DAVID FROST:
Who would you compare it to among the famous couples in history, like James Hanson and Gordon White, Morecambe and Wise, Cain and Abel?

GORDON BROWN:
I think that, I think that's for others to judge.

DAVID FROST:
The one thing that you could just dispense with forever, it seems an unlikely hypothesis to me I must confess, but is there any arrangement between you and Tony whereby Tony Blair has decided and pledged to withdraw early enough for you to have plenty of time to have your turn? Is there, is there anything -

GORDON BROWN:
What Tony Blair and I have said to each other really is a matter for us That's the first time I've heard you silent

DAVID FROST:
I was gobsmacked actually because I, because you didn't go one way or the other on that.

GORDON BROWN:
What, are you asking me does Tony Blair stay as leader of the Labour Party and prime minister as long as he wants to do the job - and he's doing an excellent job - that is, that is right, he will stay as prime minister and that is the right thing to do, he's doing a great job.

DAVID FROST:
And there's no, there's no deal?

GORDON BROWN:
The, what Tony Blair and I talk to each other about is something very private.

DAVID FROST:
It is private, but it's going to intrigue people that you didn't answer the question. Is this one you can answer, which is, are you planning to take some paternity leave?

GORDON BROWN:
Yes, and I hope that that will all work out. Sarah's very well and keeping very well and we're looking forward to it. I was saying in the House of Commons on Tuesday I'd be able to say more about the needs of children, which is a feature of the budget coming up in March, from greater first hand knowledge and I hope to be in that position to do so. I was also going to say I was going to speak from the point of view of prudence, or any other name that we choose, if it's a girl.

DAVID FROST:
Yes. what would be, what's the male equivalent of prudence.

GORDON BROWN:
I'm not sure

DAVID FROST:
Do you think it will change your life?

GORDON BROWN:
Oh definitely. Definitely, and I'm looking forward to it and we, we talk about it a lot because it's obviously very difficult if you've got a constituency in Scotland and you also stay in London and we're going to have to find a way of working that out but I'm looking forward to that.

DAVID FROST:
And in terms of the past few weeks, has the war changed your life at all? I mean have you had added responsibilities?

GORDON BROWN:
I think Tony Blair has had added responsibility and he's done a superb job and I think the esteem with which he's held right round the world as a result of that is something that we should all in Britain be very proud of. As far as I'm concerned what I've been involved in is dealing with the issues related to the financing of terrorism and we're trying to get to the source of supply of funds to terrorism and that is a fascinating but very challenging thing, where we've got to have the greatest of international co-operation.

DAVID FROST:
Well that was interesting, yes, this week you put aside a hundred million for the actual work of the battle against terrorism, I mean with other supporting costs for intelligence and the rest, is the hundred million the cost so far or do you, are you going to have to earmark more, or how long will the hundred million last?

GORDON BROWN:
I've said what the military, and indeed the international development side of this operation need, we have a duty to provide, this was a terrible attack on all of us on September the 11th, terrorism has got to be rooted out, we will provide the extra money that is needed. Fortunately, we're in a position with the soundness of the public finances to do so, and obviously if there is extra money required for security, for international development or for the military campaign, that is something that I regard it as my obligation, indeed my duty, to provide, and I believe as part of the wider alliance that we have got to make, pay our fair share, and we will continue to do so.

DAVID FROST:
Were you disappointed by there being a government statement clashing with yours, from Transport?

GORDON BROWN:
No, I was getting on with my job, I mean and I just keep doing that, obviously, Steve Byers had to report to the select committee by the next day and so he had to get the information to them.

DAVID FROST:
Tell me about your growth forecast. Obviously the figures are very positive, especially when you compare it with other civilised nations and economic equivalents and G7s and all of that, but a number of people say that, Anatol was saying that maybe you're a bit overoptimistic.

GORDON BROWN:
I think -

DAVID FROST:
We don't want you to be, incidentally, because obviously we all want the economy to work

GORDON BROWN:
If you look back on what people said a few months ago, they said that the economy would not grow by two and a quarter per cent this year, but our best forecast is that and most people have come round to that. And I think as people look at the effect of what the monetary policy changes are, seven interest rate cuts and what we're doing on fiscal policy with the public investment increasing, that makes me cautiously optimistic, as I said on Tuesday, about the economy. Obviously there are risks on all sides, there are risks if the American economy stays in recession longer, there are risks if there's some shock to oil prices, there are also other risks that if, that if consumer spending rises too fast in this country. We have got to look at all these things but on balance I'm cautiously optimistic about the future and I believe that people will come round to that view over the next few months.

DAVID FROST:
Gordon, thank you very much indeed, we'll just get an update on the news from Bill.

DAVID FROST:
Now, you've talked in this interview a lot about reform and so on, but as we look back over the last few years, and when you talk about the National Health Service, obviously it's, it's pretty resistant to reform and it's very big to reform, how, how can you be sure that these reforms will work better than others?

GORDON BROWN:
The ten year plan that Alan Milburn has seen through, the command and control health service is over, it's a thing of the past, there is far more local flexibility, local choice, local devolution. Now I want people to know that at the local hospital they go to, there's the power to make the decisions, they have the money that's necessary, they're giving people choice, league tables with information allow that to happen. There is going to be a new health service developing out of all these reforms.

DAVID FROST:
Thank you very much indeed Gordon. Talking of league tables, you've got to do something about the Scottish League Division One, the wrong team's at the bottom. Well that's all we've got time for today, my thanks to all my guests this morning and thanks to you for watching.

INTERVIEW ENDS


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