Gordon Brown interview transcript

On the Politics Show Scotland, Sunday 26 October 2008, Glen Campbell interviewed the Prime Minister, Gordon Brown

In a wide ranging interview, Mr Brown spoke about the global financial system.

He said he was "angry" and that "the proposals that we've been putting for years, which might have helped dealt with the problem, have not yet been implemented but I'm pretty sure that as a result of people seeing what's happening now, the British proposals will be taken on board."

Mr Brown also repeated his request for the authorities to investigate George Osborne's dealings with Oleg Deripaska.

The authorities he mentioned are the Electoral Commission and the Westminster Parliament.

He said that everything to do with Peter Mandelson had been found to be "above board".

Interview transcript...

GLENN CAMPBELL: Prime Minister, do you agree with the Deputy Governor of the Bank of England, Charlie Bean, who's described this as a, once in a life time crisis, possibly the largest crisis of it's kind in human history.

GORDON BROWN: I think it's the first financial crisis of the new global economy, so it's quite unique in that sense. We've had this reso

urces crisis with oil prices trebling, which is a huge shock to the economy. We've had food prices going up er, but now we've got the credit crunch as well. And if you look at all of these together, they're all happening because we've now got a global economy that stretches, way beyond national boundaries and way beyond one continent, and we're trying to deal with the problems that arise from being part of a global economy, so you've got global financial flows but we only have national regulation of them. We have a global energy problem, but we don't have a means of co-coordinating people's actions so that we reduce our dependence on oil. And these are the problems that as a world community, you've got to deal with them. That's why I've been proposing international action to deal with both the energy problem and the problems of the financial sector.

GLENN CAMPBELL: Do you accept responsibility, as somebody who's been running our national economy for more than a decade. Are you at least a co-author of our misfortune?

GORDON BROWN: To be fair to be me, I've been arguing that we have to have these global financial institutions that deal with global financial flows ever since what was called the Asian crisis in 1998 and I said then that we had to have the co-ordination that's necessary. You see you've got these big banks that are operating across frontiers and they're being regulated in one country, but they're not being supervised across continents.

You've got no global early warning system because we could have dealt with some of these problems if we'd known enough about what was happening to the sub prime market in the States. But we didn't have the global early warning system. I have been pressing for this for years. I actually think we'll now get the changes that are necessary, but while we wanted to go ahead with these changes some years ago, other countries did not.

GLENN CAMPBELL: Yet you told us you had ended boom and bust. Did you think that you were more powerful as British Chancellor than you actually were.

GORDON BROWN: What I said is we're not going to return to 15% interest rates like we had under the last world downturn interest rates in Britain are low, they're 4.5% and in fact during the last world down turn they went up to 18% and that's what caused the huge damage that went on for years, for businesses and home owners. But this is a world problem.

You see the - it's not wages in Britain or inflation generated in Britain that is causing this problem, we've got better systems of dealing with the Bank of England being independent. What's causing this problem is the global price of oil, the global credit crunch, that banks don't trust each other across frontiers or even in their own countries now.

And that's why we took the unique action to recapitalize our banks, to buy shares in our major banks, to become, if you like, the biggest shareholder in the Royal Bank of Scotland, HBOS, Lloyds TSB and the biggest shareholder in the Royal Bank of Scotland. So we've taken unique action to deal with this and now the rest of the world is following what we're doing.

GLENN CAMPBELL: We'll come on to the banks in a moment. But you mentioned interest rates. There's been a cut. Does there need to be further cuts when the monetary policy committee next meets.

GORDON BROWN: Well that's a matter for the Bank of England. You know the Bank of England are independent and I've never, never in ten years, tried to presume the action that they should take, they are independent. But I think you'll see that inflation is coming down.

You see, last year, we had this terrible problem that arose from the trebling of the price of oil, so oil per barrel goes up to 150 dollars, then everybody's petrol prices, everybody's gas and electricity bill is affected by that and that's happening in every country of the world. And food prices went up, so that caused the rise in inflation. Now inflation is actually coming down over the next few months and that will mean that it gives scope to all the monetary authorities, including the Bank of England, round the world, to make a decision about interest rates. I think over the world, you will see people responding to this lower inflation.

GLENN CAMPBELL: You think interest rates will come down.

GORDON BROWN: Well I don't want, as I never have done before, to presume what the Bank of England is going to do; it's their decision. But I think when people look to next year and the year after, they see inflation quite low and that means of course that petrol prices should be coming down. It means that after this set of gas and electricity bills, that the falling price of oil should be reflected in gas and electricity bills in the next round.

And it also means of course that we know that food prices have been coming down so the impact on people's standards of living has been all from the oil price and from the food price, then you know your two basic commodities, that have you know, every household has got to buy and that's why people's shopping bills have been, been higher. I hope that the price of these items will come down as a result of the action that's been taken.

GLENN CAMPBELL: If you don't accept that the credit crunch and associated problems are your fault, they've certainly happened on your watch. Can we afford now to spend our way out of this or are the Tories right to say that the cupboard is bare.

GORDON BROWN: Well first of all, I think everybody does recognize this is global. You know, it started in America, there was a lot of irresponsible lending taking place, a lot of it was completely unknown to the authorities, and people were passing the risks on from one person to another and a lot of them ended up in Europe so it's a problem of the banking system that has started with the tragedy of the sub-prime housing market in America. So to deal with that problem, the first thing you've got to do is get the banks moving again.

Get them back to doing the job they should be doing which is lending money to small businesses, helping families buy their homes and that's the first thing that we're trying to do, to get the banks moving again. Then we will look at what we can, well we're looking at it now, what we can do to help families through this and that means that we put more money to the winter allowance for fuel bills, you know, two hundred and fifty pounds for everybody over - household over sixty.

And four hundred, four hundred pounds for households over eighty. We're doing what we can to help low income families with their fuel bills, we're doing more to help people in jobs and help people to move between jobs more, more quickly. And we're trying to get the housing market moving again. In fact, one of my regrets is that in Scotland, whereas we've taken action with the Courts in the rest of the country, so that they will slow down and if necessary, halt repossessions where people have not had a chance to have the alternatives looked at, that is still something that's got to be done in Scotland and Jim Murphy will be calling a meeting of the mortgage lenders and of those concerned with housing, over the next few days; so we want to take every action, and this is our undivided attention, to take people through this and we'll have the pre-budget report in a few weeks which will state the action that we're going to take as far as the necessity to, to borrow, so that you can come through this down-turn. We're a low debt country and therefore, in terms of our national public debt, and therefore we can borrow to come through this difficulty.

GLENN CAMPBELL: Borrow to spend.

GORDON BROWN: We'll borrow to make sure that we can come through these, these difficult times and we've already taken action on housing and on jobs and to help small businesses, and we'll continue to do that. And I think if you've got low national debt, you know, we've got lower national debt than America or Germany of France of Japan or Italy, and so it's a lot lower than some of these countries actually, we're in a position to, to, to borrow, and that's the right thing to do in difficult times.

GLENN CAMPBELL: Let's talk a little bit about the banks. Why does your government seem so determined to make sure that the HBOS takeover by Lloyds TSB goes ahead.

GORDON BROWN: I, I think you've got to look at what's the alternative. Er, look, we, we didn't want to buy shares in the banks, it's not by our choice. We became an investor to save the banks and we put thirty seven billion pounds in to Royal Bank of Scotland and to HBOS Lloyds TSB and that was so that these banks could remain in existence.

Er, and there's nobody who's come forward with any better ideas about what can be done and so we suspended the competition rules, to allow Lloyds TSB and Halifax Bank of Scotland to merge. Now, over these last few weeks, there's nobody else come forward to make an offer for HBOS. There's nobody else come forward and said that they have a plan for it to be independent and have got the money to be able to do that. We took the action that we did to save the bank, the Bank of Scotland and save the Royal Bank of Scotland and I think what's interesting is throughout the United Kingdom, people were prepared to support that.

These are two banks that were based in Scotland, but people were prepared to support that and I think that's the right thing to do and I think it's a tribute to the fact that we have a United Kingdom, that we can all come together in a difficulty and support banks in whatever part of the United Kingdom they exist and I believe er, that the strength of the United Kingdom has been important to be able to maintain and keep our banking system moving forward.

GLENN CAMPBELL: And nationalists say that all of this has happened with Scotland as part of the Union. If this is the Union dividend, then it isn't worth having.

GORDON BROWN: Well, my goodness, look what's happened in Iceland. In Iceland where you've got banks that have been completely, they're completely overwhelmed, the ability of the country to deal with it.

GLENN CAMPBELL: Do you really think Scotland would have been in an Iceland type situation.

GORDON BROWN: You've got to look at the practical reality of the situation. You've got banks that are serving an international community. Most of the Halifax Bank of Scotland and Royal Bank of Scotland customers are actually not in Scotland. 80% of their trade is in England and Wales. And these are banks that have flourished because they are part of the Union.

Not because they are distinct with no custom in England or Wales and it seems to me a remarkable new writing of history by the nationalists, to claim that these banks did not need the support of the United Kingdom government. There was no where else for them to go. There are no other potential buyers.

There was no other sources of capital for them. We are not wanting to be permanent investors in HBOS or in the Royal Bank of Scotland. But we took the action that was necessary to save these banks and to keep them in existence so that they can continue to do the job, which people want them to do, and that's provide mortgages, loans for small businesses and everything else.

GLENN CAMPBELL: Do you think Prime Minister, as you indicated, that Scotland would have gone the way of Iceland, had it not been part of the Union, facing this crisis.

GORDON BROWN: What I'm saying is that the resources of the United Kingdom have been necessary to take us through these difficulties and you can see as a result of this, the strength of the Union, coming behind different institutions. Now the Nationalist argument is built on two things: one is oil prices and secondly, strong Scottish financial institutions. These Scottish financial institutions have problems in themselves.

They were in some senses failings within the institutions that had to be dealt with. Equally, at the same time, oil is volatile commodity; it goes up to a hundred and fifty dollars, goes back to sixty five. A few years ago it was ten dollars, you cannot build the future of the whole of the United Kingdom - people's pensions and the future of Scotland, people's savings, people's futures, people's jobs on a volatile commodity and on two financial institutions where we have had to step in to save them, otherwise they could not have been in existence in the way they are today.

GLENN CAMPBELL: If shareholders reject the takeover deal, will you still recapitalise these banks individually?

GORDON BROWN: Well, let's - well first, first of all, the Royal Bank of Scotland is a separate institution and that is being dealt with. Secondly, Lloyds TSB and HBOS have agreed a way forward for the shareholders of both these institutions. These shareholders as you know, have to vote on this. But I'd just ask people to look at this proposition. It may be, in the next few days someone will come forward and say that they can afford to buy HBOS and leave it independent, but until now, nobody has come forward.

Nobody other than Lloyds TSB have come forward with an offer to buy this. Now usually, when you're dealing with Northern Rock and other institutions people came along and said they had an offer and we investigated that. In this case, we have one offer, which is the Lloyds TSB. It protects the maintenance of the, the Halifax Bank of Scotland, in merger with Lloyds TSB and if people have another offer, then we'll obviously, we will look at it, but that's the only offer on the table.

GLENN CAMPBELL: I think the argument is that if you're prepared to recapitalize these banks individually, some people believe that HBOS will be fine on its own.

GORDON BROWN: I think you'll find that the merger between Lloyds TSB and HBOS, is wanted by both institutions now. And I think people know that there are issues that have got to be resolved and are better resolved by the merger. But it is a matter for the shareholders at the end of the day.

GLENN CAMPBELL: And if they say 'no' Prime Minister, will you recapitalize the banks individually. (overlaps)

GORDON BROWN: What you're asking us then to do is to nationalize the Bank of Scotland, to nationalize HBOS and that is the proposition that you're putting to us. I believe that the best way solution is the one that is before the shareholders at the moment... (interjection)

GLENN CAMPBELL: And if they say not to that... (interjection)

GORDON BROWN: What I'm saying is the better solution, it's the better solution because it's obvious that there is no other group of people who have yet come along, the better solution is for them to go with what is a very strong bank, Lloyds TSB. We've made it possible for that to happen. We've put in substantial sums of money to make that happen and I think that is the better offer.

GLENN CAMPBELL: Okay, last one on banking. Given the situation with these two banks and given that you are about to become the biggest shareholder. How bad is it going to get in terms of job losses and cut backs.

GORDON BROWN: Well I think the two institutions and then the Royal Bank of Scotland have got to look at what their plans are for the future. You know a lot of the problems have been in the international sector and therefore it may be that that is where the activities of these two banks will be lesser in the years to come. In their domestic lending policies, they have been very successful over many years until the difficulties that have hit them now and I think these are the issues that are resolved by the commercial judgments of the people who are in charge of these institutions.

The one thing I say is, that as part of our recapitalization and the money we put in to the banks, and being a shareholder, we've said look, we've got to resume lending to small businesses and to home owners. It's got to be offered at the level and advertised at the level it was marketed, the level it was in 2007 and we are trying to remove the blockages to that at the moment, so that banks can get back to doing the job that they're supposed to do. The reason we've got a crisis at the moment is that banks are not able or not doing the job that they were supposed to do and actually, you actually have banks for, and that is to lend to people and to keep the cash moving in your economy, so that businesses can survive, mortgages can be given, savings can be protected.

GLENN CAMPBELL: So what do you say when you hear stories of banks renegotiating the terms of people's overdrafts, businesses overdrafts and adding on an extra couple of per cent.

GORDON BROWN: Well what, what, what matters er, now is that we get back as soon as possible to the normal process of lending at affordable rates. Look, interest rates in the economy are low and they're 4.5%. We're not in the situation we were years ago when British interest rates, because we hadn't dealt with domestic inflation, were 10%, 15%. We're not in that position. But now we've got to get banks back to doing the job that they are doing and to feel confident that the loans that they make are loans that will last and are therefore based on solid foundations.

Now, we the government, have done a lot to underpin this. So we have guarantied lending between banks, so we are giving a very, very big guarantee, almost an insurance policy for, for banks, for the next period of time. We're doing this for six months initially and that's what we've done to help banks move it forward and by taking shares and by giving these guarantees, we are actually helping banks return to what they were doing.

This is, let's be clear, a crisis in the banking system that started in America, people have lost confidence in the banks and we have got to rebuild that confidence. We're doing it by taking shares in the banks and we're doing it also by giving these guarantees, and by providing liquidity to the banks and I think we're leading the world in doing this and I think other countries are already following what we have tried to do.

GLENN CAMPBELL: Another issue, Lord Mandelson, I think one of your cabinet colleagues said when you appointed him, that he was a risk worth taking. Are you still sure that that's the case.

GORDON BROWN: I think what you're referring to is something that's being looked at by the European Commission. He was the Trade Commissioner, it was raised with the European Commission, it's all being looked at and it's all been found to be above, above board and I, I really know nothing more about this other than that the European Commission has dealt with it.

GLENN CAMPBELL: Have you spoken to Lord Mandelson about it.

GORDON BROWN: Well I speak to Peter Mandelson all the time because he's the Business Secretary, but we're actually speaking about the things that really are important and that's about getting small business lending moving, about helping home owners and about helping people in to jobs and I think that has got my undivided attention.

GLENN CAMPBELL: How do you feel about cosying up to billionaires whose businesses have benefited from his decisions, as EU Trade Commissioner.

GORDON BROWN: What I actually think is that when these things are investigated by the authorities and the authorities say there's nothing, there's nothing to look at, there's nothing that's causing a problem, that unless people have any other evidence, it should be left as having been dealt with and I think to be honest, we should get on with the work of getting us through these difficult times and helping the Scottish and British people through these difficult times in the fairest possible way.

GLENN CAMPBELL: You called earlier in the week for an investigation in to George Osborne's links with Oleg Deripaska, what form should that take.

GORDON BROWN: Well this, this was an issue where someone had tried to get a donation from a foreign citizen and that is unlawful. It is clearly unlawful, it's in the legislation of parliament that it's unlawful to take, or solicit, or even to further the objective of acquiring... (interjection)

GLENN CAMPBELL: Well he says he didn't do that.

GORDON BROWN: ¿ foreign donations. Well that, that is the issue and that is what has got to be investigated and I know that the Electoral Commission has been asked to do it, the Parliamentary authorities, it's a matter for these authorities, it's not a matter for me.

GLENN CAMPBELL: Okay. It was Bill Clinton who said that 'it's the economy stupid'. If he's right about that and that's really the issue when people come to vote, no matter how well you handle this global crisis, you're going to get turfed out aren't you.

GORDON BROWN: I think that people will see that through difficult economic times, they're not problems that were created within the United Kingdom, these were problems that the whole world has had to face as a result of a banking system that started to go wrong in America and affected the rest of the world. That we are doing everything that we can to help people through these difficult times and I think you need a calm and an orderly and a considered approach to these things.

You need to be able to talk to the international leaders as I've been doing today about problems right round the world and you need to come forward with innovative and imaginative solutions. There's no point in this game of saying that someone else is to blame and everything else. What we've got to do is to get on with the business of sorting it out and when the Scottish National Party simply tried to create a divide between Scotland and England, over something that is clearly better dealt with by the United Kingdom coming together, I think people will see that as really not the best way to deal with, what is a financial crisis, that is worldwide.

GLENN CAMPBELL: Well you don't accept the charge from Alex Salmond that you're a sub prime minister. Is there anything that you wish you'd dealt with differently. Any decision, any set of regulation that you wish perhaps had been tighter.

GORDON BROWN: Well, I set up the Labour Party Conference, that I was - as someone who's always promoted fairness in everything I've done in my political career and that's the reason I'm in politics for - to promote social justice. I was angry and frustrated at what happened over the 10p tax rate. As far as the world international financial system, what I'm angry about at the moment is that the proposals that we've been putting for years, which might have helped dealt with the problem, have not yet been implemented but I'm pretty sure that as a result of people seeing what's happening now, the British proposals will be taken on board and the sooner we can implement these changes, to recognize the fact we've got a global financial system all of us are affected as we now find, by events that happened in South - southern States of United States of America or in Hungry or in Iceland. All of us are affected by these things and we need a global financial system that actually supervises properly, events that are happening beyond our shores, but can affect us all.

GLENN CAMPBELL: Just finally, you yourself said, it's not time for a novice. Should we be worried if Barak Obama gets the keys to the White House.

GORDON BROWN: Barak Obama has put forward like John McCain, policies to deal with this international economic down turn. I've actually talked repeatedly during the campaign to Barak Obama and to John McCain. I've kept in touch with them, as with President Bush, so that we can explain what we are doing and we can consult on what might happen when the new president takes over at the beginning of the year so I've kept in touch with them and both of these candidates are men with a great deal of new thinking about how we can deal with these economic problems and obviously, our relationship with America is one of the cornerstones of everything we do.

GLENN CAMPBELL: Prime Minister Gordon Brown, thank you very much.

END OF INTERVIEW WITH GORDON BROWN

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The Politics Show Sunday 26 October 2008 at 12:00 GMT on BBC One.

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