On the Politics Show, Sunday 23 November 2008, Jon Sopel interviewed The Prime Minister, Gordon Brown.
JON SOPEL: Just before we came on air I spoke to the Prime Minister. Prime Minister, over the course of this interview I'm sure we're going to hear from you the arguments why there needs to be this intervention in the UK economy, but as we stand, twenty four hours out from the Chancellor's statement, how precarious is the position of the UK economy. Are we on the edge of a precipice?
GORDON BROWN: No. But the global economy is in great difficulty. I mean what's happened is we've had a banking crisis which started in America; makes me incredibly angry about what happened, the irresponsibility of risk taking and the irresponsibility of not disclosing things. That has now spread to become not just a financial crisis but an economic crisis and the case that we have got to face is, do you take action now to prevent permanent damage later. And by taking action now and by doing things that are perhaps quite unique, can you prevent the economy getting in to a worse position and can you come out of it stronger, and that's really the questions that we are facing at the moment.
To do nothing .. would be irresponsible, so take action - would be to prevent things getting worse, so take action in a coordinated way, with other countries joining us as we have been proposing, would actually be fair better because it would magnify the impact of what we're doing. But not to act is both irresponsible and uncaring, given that what people are worried about the moment, the people sitting at home watching your programme, there are people worried about their mortgages, there are people worried about their jobs and there are people worried about their savings and small businesses particularly worrying about cash-flow. We can act...
JON SOPEL: Okay.
GORDON BROWN: And that's the role of government.
JON SOPEL: So given the extent of what you're saying is the problem, I know you won't go in to the detailed figures now, that's for the Chancellor in his statement tomorrow, but how big a fiscal stimulus does the UK economy need?
GORDON BROWN: Well there's been talk around the world. I was in Washington last weekend, debating this with other countries. Everybody generally agrees that the fiscal stimulus and that's - what we mean by fiscal stimulus is real help for businesses and families now, has got to be substantial to have an impact and you will hear President-elect Obama, talking about a major stimulus in America. All round Europe, the different countries are talking about what they can do. China, India, Japan, Australia, in the Asian block are also talking so,
JON SOPEL: So unprecedented?
GORDON BROWN: It's big because what we're facing really is, is a credit crunch and now the prospect of inflation going very low and in these circumstances, interest rate cuts can have an impact, but you need something else and this is where government comes in, when you've got low inflation and fiscal action does not therefore lead to inflation being the problem, you can take that action and in my view, you must take that action to help families and businesses now.
JON SOPEL: It's the most almighty gamble though, there's no guarantee this is going to work.
GORDON BROWN: I think, it's pretty clear to me that when we recapitalized the banks it was the right thing to do, so we took action first in Britain and every other country in the world followed and we've strengthened the banking system.
JON SOPEL: So it's no gamble?
GORDON BROWN: Well, I don't see this is a gamble, I see this as necessary, responsible action that any sensible government would want to take. Those people who say, do nothing now, would leave people as in the '80s and the '90s, without hope that their mortgage problems could be sorted out or their jobs problems could be sorted out. It would be lacking in compassion as well as irresponsible in my view. And our job as a government is to say, look, here is the problem, the problem is that the system is not working very much. We make it work better. We have a long term plan. What you'll see tomorrow is a concerted and coordinated programme of action, a plan of action right across the board, not just one item, not just one initiative, because we are clear that action can be taken if you... (interjection)
JON SOPEL: I understand that. But can we be clear about this, that at some future date, there will be a day of reckoning, where taxes will have to go up to pay for this. Are you going to be clear about that tomorrow?
GORDON BROWN: I think you can be absolutely clear that the Chancellor will set out a plan of action over a number of years for both taking action now and ensuring the security of British public finances. And I think you'll find that everything is above board, it is stated, there is no hidden manifesto, people will be absolutely clear that we're taking action now to prevent permanent damage later. If we did not take action now, then the problems later in terms of the cost to the country would be even greater.
JON SOPEL: And you've made that argument Prime Minister. I just want to be clear about this and sort of, I'm kind going to be the shop steward for the plain English campaign, that does mean tax increases later.
GORDON BROWN: What it means is he'll set out a plan. Now, I'm not going to announce his plan, but he'll set out the plan and you'll see it tomorrow.
JON SOPEL: But the principle is that if you're going to increase borrowing now, then there would have to be tax increases at a future date to pay for it.
GORDON BROWN: Well, you've got two things happening when an economy moves forward. You've got more growth in the economy and therefore more tax revenues and then you've got your public spending commitments to meet. So yes, he's going to set out a plan tomorrow but the plan he sets out tomorrow will be comprehensive and it will be concerted. And it will be based on our understanding also of what other countries are going to do round the world because this is a global crisis, needs global answers and we've got to work with other countries as well.
JON SOPEL: So the Tory critique is correct then; that this is a borrowing binge and we'll pay for it tomorrow in tax increases.
GORDON BROWN: No, it's completely wrong actually. The Conservative idea is do nothing now, leave people to face the storm, refuse to help them because essentially it's worst to take action than not to take action. My argument is and every other country now accepts this, every continent is taking the same thing, is you've got to give real help to businesses and families now. Not to give real help now would cause more damage later, but the stimulus we give and that's real help for business and family - has to got to be temporary, it's got to be timely and it's got to be targeted and that's what it will be.
I really despair of people who say in a moment of difficulty, facing a country, there's nothing we can do. It's back to there is no alternative. It's back to this idea that unemployment is a price worth paying. Now, that position may be taken by the Conservatives. They may walk away from their responsibilities, but we know that taking action now is the right thing to do. In fact it is the only thing to do and that's not just accepted by left wing governments or centre government, it's accepted by right wing governments as well.
JON SOPEL: In fairness, David Cameron hasn't said that has he? I mean he said ? (interjection) Well he said that there ought to be a freeze on council taxes. There were proposals made to help unemployed (interjection)
GORDON BROWN: But, but he says, there should be no additional fiscal stimulus and what it means is that there is no overall additional money injected in to the economy. It means we can't help home owners with their mortgages. It means we can't help people and stop redundancies, and it means also, that we can't help people who are worried about their savings and people who are worried - small businesses, about their cash flow.
If you say, at the moment, and this is the whole point of economics, that there's nothing that government can do by spending more or investing more at the moment, then that is the gospel of despair for the future. What I am prepared to do is to take the action that is necessary, show people how, over the longer term, we've got a plan for fiscal security and fiscal sustainability. Everything out there on the table, the country sees if fairly and squarely and I believe that people will say that action now is better than no action and then greater problems later.
JON SOPEL: So let's talk about some of the specifics. What would be the argument say, for a cut in VAT?
GORDON BROWN: I don't want to go in to these specifics because obviously these are announcements, whether it's about VAT or anything else, that would have to be made in a proper statement. What I would however say is whatever is announced tomorrow, it's part of not one measure or two or three measures, it's a concerted and coordinated plan that the Chancellor has been working on for some time. So, if you want to single out one potential measure, I would urge you to look at a range of measures.
JON SOPEL: Of course.
GORDON BROWN: And a range of important measures that, that will actually get the economy (interjection)
JON SOPEL: What about that particular one. Every newspaper has gone with the possibility of a cut in VAT. I know you're not going in to the specifics, but how would, hypothetically, I know, announcement tomorrow. How would, hypothetically a cut there help?
GORDON BROWN: But John, you wouldn't expect me to talk about measures that are going to be announced tomorrow but what I can say is look, what are the problems we face? The problems we face are first of all banks are not giving credit and there's not sufficient cash flow to small businesses, so we have to deal with that.
The second problem we face is that people are worried about their homes and their mortgages and I think we can deal with that. The third problem is people are worried about jobs and whether we can do something that was never done in the '80 and '90s and that's help people stay in jobs. And the fourth thing is confidence. And of course, when you act on spending? that's about confidence.
JON SOPEL: Sure. Well talk about some of those issues, particularly the banks, in a moment. I just want to stick with this idea of the sort of targeting and help. Is there a particular group that needs help or are you just saying it's help to everyone. Because Alistair Darling in the papers this morning seems to be suggesting it's help for everyone. What, including millionaires?
GORDON BROWN: But you've got to get the economy moving forward. I mean the economy moves forward when people have sufficient confidence to take the actions that they would normally take in good times and certainly people are worried about their mortgages, so they've not been spending. Certainly people are worried about their jobs, so they've been tightening their belts. What we need, right across the world by the way, and this is why I'm talking to people in America and in Europe all the time, is a concerted action that will bring the confidence that is missing in the system. When a system (interjection)
JON SOPEL: So you want people to spend more?
GORDON BROWN: Well, I think we want people to be protected in their jobs by an economy that's moving forward as far as possible. I think we want people to feel secure in their homes because most people have assets in their homes that are worth a great deal of money, but many people feel insecure. And I think we want the cash flow for small businesses to be moving forward (interjection)
JON SOPEL: You'd like to see the tills jangling a bit more in the High Street.
GORDON BROWN: All that. I think, I think consumer spending is part of this but I think it's also a confidence in the economy that encourages employers that there's going to be markets for them in the future and encourages home owners, that their homes are safe and encourages people to trust the banks again. And one of the features of this crisis and I think we should really look at what's gone wrong, is that people have not been trusting banks that have made irresponsible mistakes.
JON SOPEL: (overlaps) But if you have a fiscal stimulus tomorrow, which encourages people to spend, isn't there a danger that the same people who led to this crisis, ie. you know in the sub prime area in America and to a certain extent over here as well, that they'll spend more and they'll have more debt and that's what led to this crisis.
GORDON BROWN: Now if I, if I may put it this way. The assets that people have in Britain are far greater than any mortgage or other debts they have. I think it's often forgotten that people have built up wealth in housing and in other areas as a result of a relatively successful economy and whilst some people definitely may be over-stretched, the vast majority are people who've got assets that are worth a considerable amount of money and will return to be worth more as this financial problem is eased. And at the same time, have a capacity both to spend where necessary and want to see the economy moving forward. They have lost confidence in the banking system. My job is to (interjection)
JON SOPEL: But what do you want to
GORDON BROWN: where markets fail, the job of government is to re-build that confidence.
JON SOPEL: Okay, but what do you want people to do. Is it that you want people to be spending more money?
GORDON BROWN: What I want is an economy that's moving forward generally.
JON SOPEL: No, the specific of whether people should spend more.
GORDON BROWN: But hold on, hold on, you're not going to get me to talk about measures tomorrow. What I want is an economy where people are in jobs and feel secure in their jobs. Where mortgages are more secure for people and they're less worried about either going in to arrears or repossessions. I want small businesses, who are the life blood of our economy, to have the cash flow that allow them to stay in business. I want us to be - one of the ways we get out of this is by exporting with the, with the pound we can export to the rest of the world, so it's, as I say a range of things that are necessary. And one of the things is also public investment ? (interjection) ? in the construction industry.
JON SOPEL: And one of the things you've spoken about, just a moment ago is banks lending money. Do you understand the enormous sense of anger that is felt in the country that the banks have taken taxpayers billions and yet are making loans very difficult to small businesses and you know the threat of foreclosures on mortgages?
GORDON BROWN: Well I, I've been angry about the behaviour of banks, starting with the sub prime market in America and we've got to create a situation where, having recapitalized the banks - look, if we hadn't done that Jon, the banks, some of the banks would have collapsed. We had to do that because we recognized how important banks are to the, to the financial system. Now we've got to persuade them and cajole them in to lending at appropriate prices, at reasonable prices, to small businesses particularly, who need, who need money.
And we've got to get them to resume mortgage lending. Now, you will see in the pre budget report and subsequently, a number of measures that will actually make that happen more quickly and the question is, can we get banks back to lending at the level of 2007 and can we do it quickly. And I believe that that is part of the restoration of confidence in the economy.
JON SOPEL: What does persuade and a cajole mean? Those two interesting words that you've used. When you leave this room and when you've been speaking to the banks, I would imagine the tone is a bit angrier than that at the moment.
GORDON BROWN: Well, we were very clear that they had to pass on the cut in interest rates to mortgage holders and that actually happened. We've been very clear also that they've got to be far more sympathetic to the small business man and woman who's watching this programme who feels that the overdraft rates that they're charging or the terms or the charges are too high and we're dealing with that. And I see Royal Bank of Scotland this morning has responded, by saying they're not going to change the terms of their overdrafts when the time has extended. (interjection)
JON SOPEL: .. follow suit.
GORDON BROWN: And I expect and hope that others will follow suit. That is the right thing to do.
JON SOPEL: Have you had an indication of that?
GORDON BROWN: I think we've got an indication that the banks are prepared to listen to what the public is saying as well as the government is saying and that is they've got to be more responsible in the way they treat long-standing customers, who have served them well, and now they must serve better.
JON SOPEL: And if they don't, does persuade and cajole change in to being a bit of a stick, which you're going to make sure that they do do that.
GORDON BROWN: Well I think, I think the government has a number of measures it can take but I think at the moment, what we're wanting to do is to create all the conditions. You know, this is happening in America, it's happening in Europe, everywhere banks are not lending. We've got to create the conditions in which that lending, in which they happen. And that will be a mixture of carrot and stick.
JON SOPEL: Yes, Lord Mandelson said this morning that they had behaved alarmingly.
GORDON BROWN: I think that's true because there is a lot of confidence in banking and they are in if you like, increasing that loss of confidence by not acting in the way that banks normally do. Now, there are reasons why, in a world where things cease up, banks find themselves in a difficult position. We are unfreezing and unblocking the problems that have caused them not to lend. And I think once we've done all these things, it's up to them to respond to the public need for this.
You see, what I think people do not yet quite realize and it's important for me to say this, is that when we come down to the needs of people who have got mortgages and who have got savings and pensions in the banks, they need to feel confident that this banking system is sorted out and that's why I've been so keen to get the reforms in the banking system in place, so this shadow banking system that operated, that we really didn't know much about, is no longer something that threatens the stability of our banks and then people's finances.
JON SOPEL: Do you think you'll be able to stop the foreclosures, the repossessions by this kind of three month grace period or is that just delaying the inevitable.
GORDON BROWN: I think you'll find we're going to take further measures. Look, the position is that interest rates have come down. In the 1990s when we had a recession (interjection)
JON SOPEL: Just on the specifics, you said you would be taking further measures; I'd be very interested to hear (interjection)
GORDON BROWN: Well, we will consider further measures because look, most people who have got a mortgage at the moment, have got relatively low interest rates compared with what happened when we had these 15 and 18% interest rates in the 1990s. We've got to help them through this difficult period. If some people become unemployed, we're introducing, from January 1st, help that will be there for thirteen weeks. After you've been unemployed for thirteen weeks you will get help with your mortgages.
We want to do something also for people in work, who are finding it difficult. And I believe that it's not beyond the ability of government, working with the banks and building societies, to find the means by which people facing some problems with their mortgages, can either have longer periods of repayment or re-capitalize some of the arrears, or other things are done because you know, I'm pretty clear that with low interest rates, it's possible for most people other than because they've made a very - got very big problems, maybe in their marriage or something else - most people can stay in their homes.
JON SOPEL: Okay. Later in the programme we're going to be hearing about a number of British people who've put their money into banks on the Isle of Man that were taken over by Icelandic banks and as a result have possibly lost all their life savings. What can be done to help them?
GORDON BROWN: I have a number of people write to me about this and I'm obviously very concerned about this because the Isle of Man is not within our jurisdiction for regulation. We have guaranteed the savings of people in, in British banks in a number of cases, even though they were owned by Icelandic banks themselves. This is now a matter that the international authorities are dealing with. We are talking to the international monetary fund, who've had a deal with Iceland, about the repayment of debts that these banks have entered in to. This is something that we'll have to pursue internationally and I think we may have to look at the relationship between the Isle of Man and Britain in this respect because I think it's sad when people are effectively, an island that is operating in a different way from the rest of Britain.
JON SOPEL: Prime Minister, you're famous for that phrase, there will be no return to boom and bust. Do you now regret that phrase?
GORDON BROWN: This is an international crisis that has not been generated in Britain. (interjection) ? You, you can go back and say, what you did do and what didn't do. I was talking about 15% interest rates, we've never returned to 15% interest rates and we won't. But what I do say to you is, this is an international crisis, it's global, it started in America. We've had very little control over its (interjection)
JON SOPEL: You've made that point. But just on that phrase. I wonder whether you now regret it?
GORDON BROWN: No, because we had a situation where we had 15% interest rates in the 1990s. We didn't have control over inflation. We created the Bank of England system that has worked well for ten years(interjection)
JON SOPEL: none of the responsibility that we're in now, reside here in Number 10 Downing Street?
GORDON BROWN: I take responsibility for what happens in this country and I do so every day and I do not in any resolve from that. I think I've got a duty to explain - you can't solve this problem unless you know what caused it. And what caused it was not something that happened in Britain. What caused this problem was, was a new banking system that developed for a global market that in many cases was taking too big risks and in many cases was not disclosing people, even its shareholders, what it was doing. And we are now having to deal with the fall-out from that problem. The inflation and the problems we had, were not generated themselves in Britain. I think everybody understands, even the Americans now say this is a global problem that started in America (interjection)
JON SOPEL: When you go along the High Street, when you saw along the High Street that you had Northern Rock offering mortgages of 125%. When you were Mr Prudent Chancellor, surely you must have thought, this is unsustainable. It's fine when the sun is shining, but you know, clouds always come on the horizon.
GORDON BROWN: There's always problems every day that you have to deal with, there are new problems. But this is a very special and unique set of events that have come together round the world. We had the oil crisis, then we had the credit crunch and I don't think it really helps the debate if you say that this is not a global problem that started globally and it's got to be dealt with in a global as well as national way.
JON SOPEL: Right, what about the political fall-out from this because it does seem that since the credit crunch has come, that perversely, kind of you know, normally Prime Minister's stock falls, your stock has risen. Election in 2009?
GORDON BROWN: I'm not thinking about that at all and in fact it's almost completely wrong to even consider this because what we are thinking about all the time is what we can do. Our undivided attention is on getting this problem sorted out. Look, I have, I'm here in a job where round the world, every country is facing problems. We've got to deal, in fact we've got to help lead the world out of these problems (interjection)
JON SOPEL: Would you say, no election in 2009.
GORDON BROWN: I'm not planning at all.
JON SOPEL: You're not planning it at all.
GORDON BROWN: Of course, I'm dealing with, with my undivided attention on the problems of the economy and I don't think people would think much of me if I wasn't and that is what I am going to do.
JON SOPEL: Okay, kind of final thought really, because as I say, ? people who know you say, he looks more self confident, more relaxed, he's smiling a lot more. Is there almost a sense in which you're relishing having to deal with something which kind of maybe would suit your skills and talents and experiences?
GORDON BROWN: No. I don't think so. I mean leadership is about meeting challenges when they arise. This is unprecedented in the way it's hit the rest of the world. I think I've got a role to play because I can work with other countries. We're working well together. We are, you know, leading the G20 next year, which is a group of countries having to deal with the problem, covering most of the world economy and I think I can bring some of the experience I've got, to deal with these problems.
When you're dealing with something unprecedented however, orthodox thinking goes out of the window. You've got to think out of the box and what we've managed to do with the taking shares in banks, now with persuading people about the need for a fiscal stimulus, which would not have been accepted by many countries before, is thinking out the box, doing the right things. That is what government is for. If markets fail, governments have got to step in.
JON SOPEL: Prime Minister. Thank you very much indeed.
GORDON BROWN: Thank you.
END OF INTERVIEW WITH GORDON BROWN
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The Politics Show Sunday 23 November 2008 at 12:00 GMT on BBC One.
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