On the Politics Show, Sunday 16 November 2008, Jon Sopel interviewed The Chancellor of the Exchequer, Alistair Darling
JON SOPEL: Fresh off the plane from Washington, the Chancellor joins me now. Alistair Darling, thanks very much for being with us. Let's start with Washington; what realistically came out of that, that is going to affect ordinary people in the coming weeks and months.
ALISTAIR DARLING: I think what was important is that you know, for the first time in recent memory, you had the leaders of the twenty biggest economies in the world, nearly 80% of world economy, all of whom were agreed on two things; that firstly, this is the biggest problem that all of us have faced collectively for generations. We have a massive challenge in front of us.
The combination of the credit crunch, the high oil and food prices, they've taken a terrible toll on economies across the world. But secondly, there was an agreement that whilst we need to do things in our own countries, to support people and to support businesses, it would be so much better if we act together, to make sure that we take action not doing the same thing exactly, or necessarily on the same day, but acting together because that is the best way of ensuring that as we go in to this downturn, as many major economies move in to recession, we can get through this as quickly as is possible and I remain confident, if you look at the longer term prospects of the world economy, they are good, but I think the important thing this weekend was you saw the determination to act that frankly wouldn't have been there even a few weeks ago.
JON SOPEL: A lot of good intention and we heard a lot of talk before you went about the need for a fiscal stimulus, adage, which I suppose that if you strip out the word, it means, spend more, tax a bit less. Now, in the communiqué, which I've got here, there's a lot of talk about - this is how we could do it but there's lots of also mentions of 'as appropriate', ie you know, there isn't that much agreement yet on the detail of everything.
ALISTAIR DARLING: Look, as I was saying, what you do in each individual country may well be different. For example if you look at China for example, last Sunday, they announced bringing forward a lot spending on capital projects. In Australia, they had more emphasis on the tax side of things. (interjection)
JON SOPEL: (overlaps) so then it's not worldwide.
ALISTAIR DARLING: Well, it is because both are - those are two cases, both Australia and China, both are taking action. It will help the economies in that part of the world. Now what we do, what the Americans do, because we know that possibly President Bush, but certainly President Elect Obama, are committed to doing a lot more in the United States - what we do will make a difference.
What you actually do from country to country may vary but if you, you know if you strip all this back down and say, well why are you doing it, what difference does it make, perhaps put it this way - at a time when the economy slows down, your tax receipts start to fall. If you were then to start cutting spending or trying to get more tax out of people, that would make a difficult situation worse.
So what you do is you support the economy by helping businesses, by helping people, you do that but at the same time you also remember, it's got to be sustainable in the medium term, which means you've got to live within your means.
JON SOPEL: Fine, so let's talk a bit about the UK economy now because the Governor of the Bank of England said last week that we already are, probably are in a recession. Do you share that judgment?
ALISTAIR DARLING: Well, I said when the last figures came out that we're moving on to recession. We won't technically know until January. But you know, everybody believes that most major developed countries are moving in to recession. What matters I think is that (interjection)
JON SOPEL: (overlaps) So that's a yes.
ALISTAIR DARLING: Look, we're moving in to a recession. You know, technically, we'll know in January when we get the next set of figures but the key thing is, is to plan on a basis that our economy has slowed down; it will continue to slow, with you know, and you know, I've said we're moving in to recession, I've said that on a number of occasions now, the key thing is what do you do about it. Now, it seems to me you've got a choice.
What we seem to be getting on the Tory side now is, well, you don't do anything. You know, they've moved from a position where even a few weeks ago, David Cameron said it was right to let borrowing take the strain. They now seem to be saying something quite different and the consequences would be very bad for this country. Or, you take the view that I take and that is you support the economy now, whilst at the same time, remembering that in the medium term you've got to live within your means.
JON SOPEL: I want to develop those arguments about spending and borrowing in a minute. But I just want to put in plain English for our viewers, what does this mean? Does it mean that for example unemployment is going to continue to rise over two million by Christmas.
ALISTAIR DARLING: What happens when an economy slows down, you know, factories produce less, businesses do less, then that means that there's less tax coming in to the system. But yes, it also means that there will be some people lose their jobs. But it is also worth bearing this in mind because I think it's important in relation to jobs. If you look at the figures over the last couple of months, there have been times when almost as many people have come back in to the labour market as went out. Now that tells me, we need to re-double our efforts, which we've done through the New Deal, through other measures, through Job Centre Plus, of when someone loses their job, let's see if we can help them even before they leave the workplace and get in to work. So I just make the point because this is one lesson we've got to learn from the '80s and '90s. If we let people come out of work, go on to the dole, on to incapacity benefit, as the Tories used to, that would be disastrous. I believe there are things that we can do, that will help ensure that if people do lose their jobs, we help get them back in to new jobs as quickly as we can.
JON SOPEL: You said in an interview this week that you do have a duty to level with people and I can't decide whether you're trying to paint a very optimistic picture oh, it's going to be a short shallow recession, we'll move on quickly. Or whether you think that actually something terrible is coming.
ALISTAIR DARLING: Look, I do think you need to level with people and that's why ? (interjection)
JON SOPEL: So level - what's coming. (interjection)
ALISTAIR DARLING: We are going through a very difficult period but where I'm more confident than I was perhaps a few weeks ago is, I think there is now every chance that because countries across the world are willing to act together, provided they do that, then we can get through this far more quickly than would otherwise be the case. But you know, people can see what is going on around them. You know, they can see things are slowing down.
On the other hand you shouldn't lurch from that in to a feeling that somehow you know, it's all terrible and there's nothing that we can do. Governments can make a difference, I mean I wouldn't be in politics if I didn't believe that. We can make a difference, which is why I reject the Tory view of, you know, leave people to get on with it themselves - instead you help people get through what is a difficult time and I believe that we can do that and we will do that.
JON SOPEL: And tax cuts are part of that.
ALISTAIR DARLING: Look, you're not going to get the pre-budget report out of me today, no matter how hard you try. You'll have to wait till a week tomorrow for my projections and also what I propose. But what I can say is this, that when you have your - you're in an economic situation like this, it is right to do everything you can to help people get through a difficult period, but it's also right that you do things that will help the country as a whole, get through it more quickly than otherwise.
JON SOPEL: So no detail, I understand that completely. What about the argument though, Gordon Brown has more or less said as much, that if we are going to help, it has to be help given quickly, i.e. if there were tax cuts, would it be fair to assume that people would have them in their pay packets by Christmas.
ALISTAIR DARLING: Look, again I'm not, you know, I'm not going to get in to trailing what we might do or might not do in a week's time. But it is the case that if this is going to work here, or anywhere else, you need to do something decisively and you need to do it quickly, so it has an effect as quickly as you possibly can. Now some things take longer to take effect than others but, you know, for example you know I said a few weeks ago that one of the things we're looking at is bringing forward spending on transport projects or schools and so on - that helps because it puts builders to work. It puts the supply industry in a position where they've got orders coming in where that might not otherwise be the case. But the key thing is that you are ready to take the action and that you don't take the Tory view somehow that you just, you know, you just leave people to get on with it.
JON SOPEL: Okay, people will have listened very closely to that, that sounds like a 'yes'. That sounds like, if there are going to be tax cuts, people will feel it very, very quickly.
ALISTAIR: You will have to wait and see what I've got to propose in a week's time. There's not long to wait but you're going to have to.
JON SOPEL: Right, a question lots of people have emailed in with lots and lots of questions for you. David Weber said, 'if tax cuts are introduced as a fiscal stimulus, shouldn't the most responsible approach be to warn people exactly how much taxes may have to rise in future to pay for them, when and how the economy begins to boom again.'
ALISTAIR DARLING: Well, that really leads on from what we were talking about earlier that the agreement in Washington yesterday, and my view has always been that you do need to support people, support businesses now, but like every individual, like every business, countries have to live within their means, so that if you put money in to the system now, you've got to make sure it's sustainable in the medium term and I'm very, very clear about that. That is very, very important.
JON SOPEL: And what about (interjection)
ALISTAIR DARLING: (overlaps) and you need to tell people you're doing it too.
JON SOPEL: Yeah, and on the subject of borrowing, we've had loads of people, John Densley, David Barratt, Mark Fairley. Is there a threshold beyond which you think borrowing should not go.
ALISTAIR DARLING: Well, the test that I apply is if you have a borrowing level that you have to justify it, but obviously you've got to make sure that it's sustainable, that you can afford it. But let me deal with this because it is quite important. We reduced the amount of debt this country had over a ten year period and at the same time we trebled spending on schools and hospitals, transport, and nobody at the time said you didn't need to spend money on the Health Service, or on improving the railways or anything like that, so we did that. Now, because we now have a lower level of debt than actually most other developed countries, we are in a position where we can let borrowing take the strain. You do need to spend money to support the economy at this time and spending includes you know, helping people as well as helping you know, in the things like hospitals, schools, housing and so on; you do need to do that and only governments can do that and the lesson of the past is when governments stand back and say, 'no, we're not going to get involved', that's when people begin to suffer and no one can justify that.
JON SOPEL: And so we borrow more, we cut taxes, we maintain spending. What happens if that doesn't work. What's plan 'b'.
ALISTAIR DARLING: Well, if you look at the combination of things that we're doing, you know, we've been talking about what governments can do in terms of helping people generally, you have to look at that alongside what the Bank of England has been able to do and we've had a very big cut in interest rates - they're now at the lowest level they've been since 1954, it is the combination of those, both those measures will help. In addition to that, you know, don't let us forget what we've been doing over the last few years, the fact that we've had over ten years of very strong growth, the fact that we are supporting people and the economy, the fact - despite the fact, (interjection)
ALISTAIR DARLING: there's still a lot of people in work. All those things will help.
JON SOPEL: Yes, I understand that Chancellor but what is the threshold, is there a threshold when you say, actually, we can't go above that level for borrowing?
ALISTAIR DARLING: What we have to decide and you know, I'll be setting this out in the pre-budget report next week is what levels of borrowing can I justify now, to do all the things that we've been talking about, to support people, to support businesses, but I also have to take in to account, as countries agreed yesterday, that it's got to be sustainable. Sustainable means you've got to live within your means within the medium term. Now that is just as important and you know, when people (interjection)
JON SOPEL: But is there a level where you think, actually, that's worrying. That would be too much?
ALISTAIR DARLING: Well it's a judgment that I will be making and I'll set that out next week but the two things are important; Yes supporting the economy but yes also making sure that we live within our means and you know, as people, you know speculate and so on over the next week or so, both those things are important because in the long term we have to make sure that we continue to have a strong economy because that is the foundation of everything we want to do in terms of creating a fairer country, one with better prospects for children and people's grandchildren. It means you've got to have strong economy, which means you do need to make sure that whatever you do, it's capable of lasting.
JON SOPEL: (overlaps) Let me put this question to you from Guy Morgan who says, 'what big ticket projects are you going postpone until we're seeing a better economic picture and what belt tightening is the government going to make if it's expecting the rest of the country to do the same?'
ALISTAIR DARLING: Well look, again, this is, this is the stuff of the pre-budget report, but I think it is important that governments, along with any other organization, when they come under pressure they should seek to be as efficient as they possibly can and you know, that is something which you know, the public sector has to do just as much as the private sector. And again, a week tomorrow, I will set out how I propose to deal with all these things, right across the piste, all the things you've been discussing.
JON SOPEL: Yes. Very interesting, so it's possible that there - because anyone you know, compares it to a household budget, yes I may borrow a little more but actually, I think what I'm going to do is cancel the foreign holiday this year. People kind of will relate to that, so are we now just carrying on with the big ticket items like I don't know, a third runway for Heathrow, ID cards, Crossrail, all those other fantastically expensive things?
ALISTAIR DARLING: Let's just mention the two transport things that you were talking about. Firstly, if there is a third runway at Heathrow, it will be built by - commercially, by the private sector, by BAA who own Heathrow. It won't be built by the government. The second thing, Crossrail, which is a London railway, linking east and west London, that's a classic example of whereas in the past, we used to chop all those transport projects, where I do think you need to maintain investment.
Now I was Secretary of State for Transport for four years and I lived the consequences of successive governments, Tory and Labour, that chopped spending on the railways. What happened, well we saw it graphically in the early, late 1990s, when you know, simply the system ground to a halt. So I think, I think long term investment is important because as we come through this, we will need a well population, we'll need transport that works (interjection) we'll need housing
JON SOPEL: Do we need ID cards?
ALISTAIR DARLING: Well, ID cards, the case there has been set out on many occasions. You know, it is a fact of life that we will have biometric passports, you know going to logical step, that is identity cards after that. So, look, I'm not going to get drawn in to what I'm doing next week. Try as you might, all I can say in reply to the person who sent in the email is, yes, you're absolutely right, governments do need to live within their means, however the difference between the government and the private individual is, that only the government can actually support the wider economy and that we shouldn't ever forget that.
JON SOPEL: I just want to ask you a final question, Chancellor. Whether you like it or not the history books are going to have it that you were the man on the deck when the world's biggest financial crisis in generations came. Does it ever keep you awake at night.
ALISTAIR DARLING: No, apart from last night, when I was sitting in an aeroplane over the Atlantic, I probably sleep very well. Look, I think what is striking now is you know, we're living through extraordinary times. I was reflecting yesterday in Washington, there we were, with the leaders of the largest economies in the world, every one of them now facing up to the fact that we face probably the greatest challenge we've seen in generations and I think what is encouraging is that they are ready to act together. The test will be can we do that together. But I believe that if we've got the right political commitment, if we've got the right will, we can and we will make a difference and we'll get through what is an extraordinary difficult time for everyone.
JON SOPEL: Daunting responsibility.
ALISTAIR DARLING: Of course it is. But you know, you don't go in to politics for an easy ride. You know, there's a challenge is there to be met and I'm relishing it.
JON SOPEL: Alistair Darling, that you very much. I hope you get some sleep after that trans-Atlantic journey. Thank you very much for being with us.
ALISTAIR DARLING: Thank you.
END OF INTERVIEW WITH ALISTAIR DARLING
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The Politics Show Sunday 16 November 2008 at 12:00 GMT on BBC One.
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