On the Politics Show, Sunday 5 October 2008, Jon Sopel interviewed The Leader of the Conservative Party, David Cameron.
DAVID CAMERON: Yes, I think we are facing very difficult times, a very difficult situation, particularly in financial markets, and that was one of the reasons why last week I said that we were prepared to put aside party politics and work with the government. Why? Because I think it may be necessary to do some really quite big things, and if it does become necessary to do big things then I think actually it helps if you have the government and opposition parties working together so we can face the country and say: "Look. This is difficult; this might be expensive but it does need to be done." And that was the purpose for what I said.
JON SOPEL: When you said big things what are you talking about?
DAVID CAMERON: Well people have raised a number of different ideas. One is a sort of UK version of the Hank Paulson plan, where you take the toxic assets out of the banks. I don't think that is the right approach, not least because you are then, the taxpayer is taking all of the bad risks out of the bank. I don't think that's the right approach.
I think instead we should be looking at and considering what happened in Sweden, when their banking system was in very bad situation, which is looking at the options of recapitalisation of the banks, which is going to the cause of the problem rather than the symptoms, and I think this may be something that is necessary. I hope it isn't necessary, but if it is then obviously it is something we'd want to talk to the government about and make sure that it is done in the right way.
JON SOPEL: Recapitalisation of the banks. Isn't that another way of saying nationalising the banks?
DAVID CAMERON: No it's not. What it is, it's a way of question of saying to creditors and shareholders and potentially the government and taxpayer as well that we need to increase the capital that the banks have, increase their resources. The problem at the moment is the banks aren't lending to each other.
The Bank of England's meant to be the lender of the last resort, there's a danger of it becoming the lender of the only resort. So a recapitalisation, to strengthen the banking system, may well be necessary. If it is I think it's something parties should talk about, and I think it's something where consensus would be better than opposition.
JON SOPEL: I mean you do realise how bizarre this sounds, having a Conservative leader sitting here and saying one of the things we may have to consider now is essentially state aid for the banks?
DAVID CAMERON: Well there's only one thing worse than state aid for the banks, and that is actually not doing anything. And so I think .... Look, I hope this doesn't happen. the point is, the point is if it's necessary to do something big then I think that the parties need to talk to each other. That's why I said what I said during the week. That's the point. But let's hope it isn't necessary. Let's hope that with the Paulson plan going through that confidence will recover, that money markets will ease, that banks will start lending to each other, but I think it is important...
JON SOPEL: This is a very different DAVID CAMERON from the one who opposed state help for natioanlising Northern Rock.
DAVID CAMERON: I think the wrong approach was taken with Northern Rock. I think it would have been better, as we argued, if we'd had a Bank of England-led reconstruction, rather than a nationalisation. But the point is that I think the piecemeal, the ad hoc approach, to this problem, the end of the road has probably comef or that, and I think it may well be necessary - as I say, let's hope it isn't - but it may well be necessary to do more, to do something more substantial, and in that case I think it's right that we take the right path, which would be recapitalisation, rather than the wrong path, which I believe would be trying to take out the toxic assets.
JON SOPEL: And that might mean taxpayers' money.
DAVID CAMERON: I think it could do, yes, and I think we have to be frank about that. this is what happened in Sweden, a centre right government 15 years ago had to do this, and I think it's important that people know that the politicians are prepared to work together over this.
JON SOPEL:What about the Irish and Greek example of saying to everyone that all your savings are safe? Wouldn't that offer massive reassurance?
DAVID CAMERON: You shouldn't rule that out, and that may become appropriate, but I think part of the problem with that is that you are dealing with the symptoms rather than the underlying cause, and the underlying cause is lack of capital, lack of confidence in the banking system, and I think it may be better to go to the cause rather than try to deal with the symptom.
JON SOPEL: You've been very interesting in the path on issues of areas responsibility, and who is responsible for things, and you spoke in your speech about that bankers had been irresponsible. Haven't we all been irresponsible?
DAVID CAMERON: I think that we've had too much debt, there's been too much borrowing, the government has certainly done too much borrowing, and the country has done too much borrowing, and we need to make sure we establish a system in which that can't happen again, and that's why at our conference very significantly, we said right, "We've got to deal with the government borrowing situation, we're going to have an independent office of budget responsibility that's going to effectively going to call time on government debt, and also we need to restore to the Bank of England that power to call time on debt levels in the economy".
What we've had is a situation where borrowing has gone up and up and up. As I put it in my speech, "The tap called borrowing was turned on and was left running for too long, and the changes that Gordon Brown made to the Bank of England meant that the referee had been taken off the pitch." There was no-one there to blow the whistle and say indebtedness has gone too far. So we've got to learn the lessons of that and I think the Conservative party has done that very effectively.
JON SOPEL: But what about the responsibility of individuals? No one forces an individual to get a 125 percent mortgage.
DAVID CAMERON: No of course not, I think there are lessons we all have to learn from this but the fact is this was going on, we had a situation with a huge growth of buy to let, huge growth of self-certified mortgages, huge growth of mortgages over 100% and, you know, the fact is the regulatory system failed to call time on this, and that we have to learn from. Now, all of this time Gordon Brown was Chancellor of the Exchequer, he established the system that allowed this to happen.
The regulatory system was the one that he established. It hasn't worked, it has to change, and we are setting out the changes that need to be made, and I think we made quite effectively the argument last week that because we weren't involved in the construction of this system we are more likely to be able to take the steps to change it.
JON SOPEL: I just want to go back to something else you said in your speech to the Conservative party conference. You said there would be a day of reckoning. What will happen on the day of reckoning for these bankers?
DAVID CAMERON: Well clearly we have to change the way that regulation is done. One of the issues here is that...
JON SOPEL: I'm just interested in what this idea of a day of reckoning for the bankers means.
DAVID CAMERON: Well we have to make sure that the bonus systems are looked at. The problem at the moment is that some of the
JON SOPEL: What does that mean, looked at?
DAVID CAMERON: Well let me explain. Some of the bonus systems in banks at the moment encourage behaviour that is incredibly risky and can actually put the bank itself at risk, and we need to make sure that is overseen by the regulator, the Financial Services Authority, and I think that is what needs to change so we don't have a system in future where actually people are incentivised to do things that are full of risk.
JON SOPEL: And overseen or banned?
DAVID CAMERON: Well I think it will change. If the Financial Services Authority is responsible for looking at these things, if they take a view that it's making the bank more risky, it will affect the bank, so it's a regulatory solution.
JON SOPEL: Right but you might say "no, you cannot do this".
DAVID CAMERON: It may be that the regulator will come to that view...
JON SOPEL: And you would support that?
DAVID CAMERON: Well if it's necessary yes. The problem is, that if you - this is quite a complex point - that if you incentivise people in banks to maximise the return on equity rather than the return on the overall assets of the bank, it encourages very big borrowing, very big leverage, because then your equity base is small and the return is higher. Now it may be that that specifically wants to be looked at and it may be that the Financial Services Authority may want to say actually this is not the way we should be going.
JON SOPEL: You've been careful not to promise tax cuts. Can you rule out that there will be tax increases under a Cameron government?
DAVID CAMERON: No responsible opposition can ever rule things out. What we've said is that we will get control of public spending, we will control it over the medium and long term, not just the short term, and in that way we can restore proper good housekeeping economics. But no opposition that's responsible can ever rule things out.
JON SOPEL: So how are you able to then say that council taxes will be frozen - and I'm sure many of our viewers will be delighted to hear it - but how can you guarantee that?
DAVID CAMERON: Because we've been through the government's spending and we've found some areas where the government, like every business, like every family, should be tightening its belt, and at the moment the government spends 1.8 billion pounds on consultants. If you save money from that, and the government is the biggest advertiser in Britain apart from Proctor and Gamble, and if you savings in that, you can pay for a two-year council tax freeze. It is costed, it is set out, the figures have been confirmed by the Institute for Fiscal Studies, and it's exactly what every business in this country - people will be watching this programme, in business, and they will be cutting their ad budget, they'll be cutting their consultancy budget, they'll be trying to help their customers. That's what the government should do.
JON SOPEL: And I want to remind you - do you remember your speech to the CBI in July?
DAVID CAMERON: Yeah.
JON SOPEL: "We all know that the easiest thing in the world is for an opposition party to stand up at an event like this and blithely talk about all the efficiency savings we will make in government? that miraculously deliver substantial savings without harming public service delivery at all. It is a well-trodden path by opposition parties. I know - I've been there.' It sounds like you're back there again.
DAVID CAMERON: No, not at all, because we've identified two specific areas where cuts could be made, and we have National Audit Office reports and other reports showing how the cuts could be made. Now let me just give you this figure...
JON SOPEL: But you've argued there that efficiency savings are nonsense, and...
DAVID CAMERON: This is not an efficiency saving. This is saying, at the moment, government spends a lot on consultants, we think a lot of that is wasted and wrong, and we're not going to do it. It's not just efficiency savings - we don't want to have a national identity card, we don't want to have a national identity register...
JON SOPEL: Yes, and that's already been earmarked for other things.
DAVID CAMERON: There are consultants, though, all over those sorts of projects. The Childhood Database - we're scrapping those. If you look at the figures in the National Audit Office report, they find that the government spends five times as much per employee on consultancy as business does. We can make savings from this. 1.8 billion is a huge figure to spend on consultants; on advertising all we're proposing is you take the advertising budget back to 1997 levels. It's still a big budget, there's still a lot of government advertising that is going to take place, but you really should be, you know, cutting your cloth at a time like this to help people, as we would, with a two-year council tax freeze. I think that is really important. Families out there are hurting, they're paying bill fuel bills, big food bills, they want a government that's going to help them, and that is what we'd be.
JON SOPEL: Okay, I want to talk about one other area. I wonder if you had any conversations with Boris Johnson before he called on Ian Blair to go?
DAVID CAMERON: Well I talk to Boris all the time about a range of subjects...
JON SOPEL: And on this one?
DAVID CAMERON: On this, I've spoken to him about this issue, but I mean Boris's view and my view on this have been well known for a long time. I said I think a year ago that I thought that new leadership was needed at the head of the Metropolitan Police and I'm glad that's going to happen.
JON SOPEL: So you're glad he's been forced out?
DAVID CAMERON: I'm glad that there's going to be a chance of new leadership, I think that...
JON SOPEL: What had be done wrong, because no-one has explained that. If you look at Boris's statement that he made afterwards, it was talking about what a marvellous job he'd done, about cutting crime virtually across the board...
DAVID CAMERON: There were some good things that he did, in terms of neighbourhood policing, but I think if you look at all of the problems that he'd been involved in it was time for change, and that was the position that David Davis and I took I think about a year ago, and my view hasn't changed since, and I think that this is a good opportunity now - this is the most, one of the most important police forces in the country, it's a very important job...
JON SOPEL: You don't worry that you're going to struggle get new applicants for the job because they sense it is now a political football and I'm going to be kicked around, possibly losing my job if the Conservatives lose City Hall in four years' time?
DAVID CAMERON: No, I don't think there'll be any problem at all. A lot of senior police officers will want to do this job, it's an incredibly prestigious job. But I do believe in police accountability. I think senior police officers, like other public servants, have to be accountable, and in politics and in life if you don't succeed and things go wrong, you have to sometimes carry to can, that's right.
JON SOPEL: And was Sir Ian's crime to be too close to New Labour?
DAVID CAMERON: I think he showed a number of misjudgements in that direction. I don't think that's the only reason, but I think that didn't help.
JON SOPEL: And talking of New Labour, I just wanted your reflections on the return of Peter Mandelson to the Cabinet.
DAVID CAMERON: I think it's a pretty desperate move, really. We've got a government that is divided and dysfunctional, and I think this will make it more divided and more dysfunctional. To me this is about trying to shore up the Labour Party, it's not trying to serve the country. They're looking at their own problems and trying to deal with them to sort of try and save Brown, whereas actually what is needed is a government that is really unified, like my party is, that can actually serve the country.
JON SOPEL: Peter Mandelson said, I think in one of the papers today, that he was joined together at the hip with Gordon Brown.
DAVID CAMERON: Well I think that is part of the problem with Peter Mandelson. He says things that are, really quite difficult to believe if I can put it that way.
JON SOPEL: Haven't you got a phrase in the Conservative Party of what a Mandelson is?
DAVID CAMERON: Erm, it's certainly true
JON SOPEL: Yes
DAVID CAMERON: Yes, we have, I'm not sure on prime time television is the right time to explain it.
JON SOPEL: Explain it.
DAVID CAMERON: The point is that everyone who knows Peter Mandelson, who's bumped into him recently, has heard that he doesn't always have great things to say about the Prime Minister. I don't want to go further than that, but it beggars belief that this is going to be a government that isn't dysfunctional and disunified.
JON SOPEL: Isn't it true that in Conservative party circles that you define a Mandelson as the time it takes between meeting Peter Mandelson and him being rude about Gordon Brown?
DAVID CAMERON: Yes.
JON SOPEL: Yes, so okay, that's fine, we've got that from the Conservative party leader, that's what you define a Mandelson
DAVID CAMERON: I'm sure, a Mandelson will probably get a bit longer now, I expect.
JON SOPEL: Right. Isn't Gordon Brown right, though, when he says these are serious times for serious people, and you have now got some pretty big figures in that cabinet, and maybe as a counterpoint to what you have in your shadow cabinet.
DAVID CAMERON: I think these are serious and difficult times, and what they require is a party that is unified. That was the thing about our conference, was that we could spend all our time looking outwards to the country and talking about the challenges families face and challenges that the country face. We don't have to spend time on trying to shore up divisions in the shadow cabinet because there aren't any. And I think that's the problem, and that is where the government is falling down, is it is disunified, it is dysfunctional, and I can't believe that adding Peter Mandelson to it in the long run is going to help, because if one of your problems is you've got divisions, you've got briefings, you've got splits, you've got backbiting, I can't believe this is the right answer.
JON SOPEL: DAVID CAMERON, thank you very much indeed.
DAVID CAMERON: Thank you.
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The Politics Show Sunday 5 October 2008 at 13.30BST on BBC One.
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