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Breakfast with Frost
Chancellor Gordon Brown MP
Chancellor Gordon Brown MP

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

DAVID FROST: We're delighted to welcome - we advertised it earlier - and we're delighted to welcome Gordon Brown, the Chancellor of the Exchequer. Gordon good morning. It's a rare day when you have a front page in the News of the World but it wasn't in the more garish section of the News of the World, it was over there on the left, and it was to do with the fact that you stepped in on this row over Derry Irvine's wage increase. Have you stepped in on that?

GORDON BROWN: No, that's not correct. Derry Irvine did not want this rise, he did not choose to have this rise, and he himself made his own personal decision that it was not right to take that rise while the review took place into the whole system of linking what is essentially performance-related pay to judge's salaries. And I believe that that's the right decision that was made and I think the people should applaud him for not taking the rise that in statute he was entitled to have.

DAVID FROST: But why did he take it before the fuss, before the oop hit the fan.

GORDON BROWN: Well I've got to, I've got to say to you that because of the way the system works, it wasn't publicised in the first notification of what was coming out and I personally only knew on the Friday afternoon. And then we found that there's an anomaly in the system: if a permanent secretary in the civil service gets a performance-related pay rise, then under an old statute Lord Irvine has to have two and a half thousand pounds more than what goes to the senior judge who is linked to the permanent secretary. So it's an anomaly, it's got to be sorted out, a review has been recommended, this cannot happen in the same way again and I believe that this will be sorted out over the course of the next few months.

DAVID FROST: And in terms of other headlines this morning, the Sunday Times went with the fact that you've come up with a firm decision anti the euro. That doesn't sound credible at the moment.

GORDON BROWN: No this is not correct. The assessment has actually not started. We're doing a tremendous amount of work. This is the most difficult, the most important economic decision that this country has had to make in economic policy. We're determined to do it on a rigorous and comprehensive analysis. The assessment itself has not yet started, the first report of the results will be to the House of Commons, not to a newspaper, and I believe that when people see the work that we've done they'll know that it's not just comprehensive and rigorous, it's looked at all aspects of the effect on the British economy and interestingly enough the next thing that we're actually going to do is not the assessment, it's the European Economic Reform white paper that's to be published in the next few days, and we're putting forward a series of proposals about reform in Europe, including - we don't either qualification majority voting on taxation or tax harmonisation, but we do want far greater flexibility in the European economy, and that will be made clear in the next few days when we publish that Economic Reform white paper.

DAVID FROST: So, as you made clear there, the work is under progress on the actual test - research but not assessment.

GORDON BROWN: No, the assessment has not started. There are 18 separate studies that are being done. I will report all the details of these to the House of Commons. The assessments that will follow the studies, and that of course will happen later, and of course we have until June to make the final decisions.

DAVID FROST: And what about the situation, in terms of these assessments and so on, June is the deadline and you'll hit the deadline?

GORDON BROWN: It will be done by June, as we've said all along. It was within two years of the start of the parliament. But I don't think people should underestimate the rigor and the comprehensive nature of the work. We will publish all the studies, people will see for themselves - we've looked at trade, the effect on the housing market, on business investment, the capital market, the flexibility of the European economy and the British economy - all these are part of this assessment and it is detailed, rigorous, as you would expect and demand that it was.

DAVID FROST: And in terms of understanding this, is this, in terms of this parliament, this big date in June, if the decision was say no, is that once and for all the only time this assessment is going to be made in the whole of this parliament, or could you do it again the following year?

GORDON BROWN: David, David, you're trying to drive me down a road. You must wait and be patient and see the assessment and all things will be made clear when that assessment is done. The assessment has not yet started.

DAVID FROST: No. But I mean is it once and for all?

GORDON BROWN: You're trying to drive me down a road I can't go down because we are working for the assessment. I know how enticing it is to be drawn into these hypothetical questions by such an interviewer with your intelligence and acumen, but that is not the way forward. The way forward is to make the assessment, to announce it to the House of Commons and to do it at the proper time.

DAVID FROST: And two other assessments here today - Bank of England - this was the front page of The Business - Bank of England to cut UK growth forecast, which will put pressure in turn on you. Is that true?

GORDON BROWN: I don't think it's going to put pressure on me. I think we are all dealing with a world downturn that has started in America, it was mainly about the IT sector to start with, it has effected world trade - the remarkable thing is that the British economy, unlike America or Germany or Japan, that has been in recession, the British economy has continued to grow. And while I will never be complacent and I'll always be vigilant and I know the concerns of manufacturers and others, and people will say things have, about the current situation: the truth is in this circumstance that you ask yourself are the fundamentals of the British economy sound? We have low inflation, which we didn't have ten years ago or 20 years ago, facing a world downturn. We have a fiscal position that is sound because we've cut debt, we froze public expenditure, we've got debt payments very low, we've paid off 37 billion pounds of debt in one year, more than in any year since the Second World War.

DAVID FROST: Good news, but -

GORDON BROWN: The fundamentals are sound.

DAVID FROST: That's the good news. But then of course there's the bad news , the IFS saying there's going to be an 11 billion black hole if you're going to stick to your rigid principles, there's a stock market that's down 14 per cent, which is bad news for pensioners if they're saving money and so on, and there's a general feeling abroad in the land that the whole thing is coming apart.

GORDON BROWN: I do understand people's concerns, and just to go through each one of these. The IFS, the forecasting body, did not say there was a fiscal problem this year or next year, they were speculating forward many years ahead. As far as the stock market is concerned, every stock market around the world has been affected. And, again, the question you ask in these circumstances: is there low inflation? Is your fiscal position sound? Can you then build on that? And I believe we can. And the remarkable thing about the British economy is that unlike others it has continued to grow and of course employment has been very high over these last few years in the British economy, with still a high level of vacancies, and now, of course, we've got the lowest interest rates for 48 years, and the best inflation for 40 years.

DAVID FROST: Manufacturing's gone down again and now, I suppose you can say well we ceased to be a manufacturing nation years ago and it's a small part of the economy, but down another four per cent, that's bad news for people in manufacturing.

GORDON BROWN: It is, it is indeed and these are the challenges that we're meeting. And I've, I made a speech last Monday saying if we are going to be best prepared as an industrial economy for the upturn, the world upturn, then we've got to make changes. Competition, we've got to be more competitive, more enterprising, we've got to concentrate on innovation and skills. We've got to actually be more flexible, as an economy, more flexible than the rest of the European economies, and more flexible in the way that America is. And I've subsequently been talking to the director general of the CBI, Digby Jones, about these issues.

DAVID FROST: This is a determined attempt to get together with the CBI?

GORDON BROWN: There is so much common ground about what needs to be done so that Britain is best prepared to be the beneficiary of the world upturn and there are changes that I'm looking at in the context of the budget statement, that I'll make in the next few weeks and in other policy changes that we're talking about, and we have decided - Digby Jones and myself - that there are areas where we can work together on investment, on enterprise, on improving the innovation and skills of the economy and helping to make the economy more flexible. And we will be working through these in the next few days and weeks. Indeed I've met many members of the president's committee of the CBI over the last few months; I've had regular discussions with Mr Jones himself and I think it's important to recognise that in the interest of the British economy, moving forward, as the world upturn happens, then there are changes that we can make that put us in best kilter to do well in these next stages forward.

DAVID FROST: And to those people who say they said they'd beaten boom and bust and they're now saying they spoke too soon - boom and bust is back.

GORDON BROWN: I don't accept that. The British economy continues to grow and over these last six years the one thing that has been absolutely consistent about the Labour government's management of the economy is that by making the Bank of England independent, by keeping inflation low, by paying off debt, by taking difficult decisions in public spending when it was right to do so, we have managed to have an economy that continues to grow. And I think people should remember that America's been in recession but we have not been in recession, and so has Japan, the Japanese economy, and so has the Germany economy.

DAVID FROST: But I mean in ... I mean we don't want to talk ourselves into a slump, absolutely, and we Brits are often very bad at sounding our own horn or trumpet, but in this particular situation, I mean you had to revise your growth figures down once, you might have to do it again: things are not quite as ideal as you are outlining.

GORDON BROWN: We said that - we said that growth would come in at 1.6 per cent last year, and in fact it's coming in higher than that at 1.7 per cent in the latest figures. And I'm never one to be complacent - you know that I would always be vigilant - and I do understand the problems of people with their pensions and savings have at the moment but, again, you have got to go back to what is necessary for an economy to be successful in the longer term and you've got to take that long term view as well. And I think it's very important to recognise that the changes we're about to bring in to improve our ability to benefit from the upturn, to make our economy more flexible, changes in consultation with business and with the industrial community, are the means by which we have a British economy that's not just stable but it's going to succeed in the future.

DAVID FROST: And in terms of people coming forward, there was one editorial the other day that said please for God's sake Gordon, they said, will you postpone because the timing is wrong, these increases in national insurance because they were thought of at a time when the economy was in a better state and it's going to have a disastrous effect. Please Gordon postpone the national insurance -

GORDON BROWN: The only reason we're bringing in the national insurance change is so that we can fund proper healthcare for the country. And if you look at America, David, healthcare costs rose 13 per cent last year and 13 per cent the year before. A massive rise in healthcare costs - why? Because of new technology, new aspirations about getting the best treatment. They're rising in France and Germany. Now the only reason for this tax rise is so that we can have a better health service. We've got 39,000 more nurses, 10,000 more doctors, we're building new hospitals, and I believe it is the right decision for the healthcare of our communities over these next few years, and I believe that people do support more money being paid to the National Health Service, if they can get the results in the reforms that we're bringing in.

DAVID FROST: Gordon what about the situation, what about the cost of the war? People are estimating that the cost of a six week war would be three and a half billion to the UK economy. Do you have that money standing by or will you have to raise it?

GORDON BROWN: We've always in difficult circumstances like these, whether it's been Kosovo or Afghanistan or whether domestically it's been foot and mouth and other emergencies that we did not expect, we've always had to find the money and make it available. And one of the benefits of our new system in fiscal policy is that we're far more able to deal with these difficulties and emergencies as they arise. So we will find the money and it is necessary that we do. And the reason is that a dictator like Saddam Hussein, if eventually we have to take action, cannot be left, with impunity, to break international law and to persistently defy the international community. And what Tony Blair is saying and what he's been doing is absolutely right and I believe that the British people will come to the view that this is the right course of action, that we must stand up to dictators who defy the international community by having weapons of destruction and failing to disclose them - and even trying to find the means of deceiving people about the disclosure.

DAVID FROST: And, in addition, we will find the money - whatever the figure is, you said, we'll find the money. What about, how do you make provision for the period after the war. Someone was saying that if we had hundreds of thousands - not just ours - troops there in Baghdad that you could see a cost of 32 billion pounds a year to maintain - that's a hell of a lot of money. Can you find that too?

GORDON BROWN: I believe people will want to share the costs, if there is and there has to be action, and if there is this aftermath that people talk about, I think the international community will want to share the costs of that - as has happened in Afghanistan, as has happened in Kosovo, where the World Bank has been involved and where different countries have themselves contributed to the costs of what is an essential reconstruction in the interests of building both a democracy and building a stable and successful economy so that people are fed and people have jobs and people have an economy that can work for them in the future.

DAVID FROST: And so that you expect them to come in and help defray the costs.

GORDON BROWN: I would have thought that just in the other instances of Afghanistan and Kosovo, the international community, that is many countries, will want to come together to help pay these bills, yes.

DAVID FROST: And you are on the verge of a Guinness Book of Records triumph, longest serving chancellor -

GORDON BROWN: My football team's at the top of the league.

DAVID FROST: Yes - Raith Rovers! - Raith Rovers. And also a record length of time as chancellor of the exchequer, it will be, next year you'll go ahead of David Lloyd George's record.

GORDON BROWN: Well I'm not really so interested in the record books - even though I studied history - I think it's what you do with a job rather than how many days or months or years you're in the job that matters, and I want to concentrate on getting the job done as well as possible and that's about jobs, it's about the economy.

DAVID FROST: And what's the quality that a chancellor of the exchequer needs most?

GORDON BROWN: I think - pensions - you've got to take a long term view. You certainly must be vigilant at all times and you must be cautious and prudent otherwise you cannot do the job. But I think you've also got to take a long term view. You must recognise that there are, events happen every day that are difficult for an economy, and there are people who lose their jobs, and that is a terribly sad thing to happen, but we've got to make sure we can create jobs for the longer term, and you've got to take that long term view.

DAVID FROST: [BREAK FOR NEWS] Well Charles Kennedy will be on the march next weekend, and I think we can say with some certainty that Gordon Brown will not.

GORDON BROWN: No, I will not be on this march.

DAVID FROST: Thank you very much.


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