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Page last updated at 12:17 GMT, Sunday, 1 February 2009

Gordon Brown interview transcript

On the Politics Show, Sunday 1 February 2009, Jon Sopel interviewed The Prime Minister, Gordon Brown.

The Gordon Brown interview

Interview transcript...

JON SOPEL: Prime Minister, for the past year you've told us that the UK is better placed to weather an economic downturn than any other country. Now we've had this report from the IMF which says, we're going to be the worst hit. It's confusing, who is right?

GORDON BROWN: We are better placed. The reason that we're better placed is we've got low interest rates, low inflation, low public debt. If you look at the corporate sector, outside the banking sector, it is better placed, without high levels of debt and we are making all the changes that are necessary to prepare us for the future and what you'll get is lots of forecasts in the next few months, they change almost every, every week. I think what happened after Lehman Brothers, the financial sector became a greater focus. Obviously we've got a big financial sector and the question of course, what is going to happen to our financial sector, over the next few months. But last year, we were slower in to the recession. America went in to recession, probably November 2007. The Euro area about June 2008 and we came in to recession later and that's another fact to be taken in to consideration. (overlaps at end)

JON SOPEL: So the IMF, which has no axe to grind, is an independent body, is wrong?

GORDON BROWN: No, but the IMF changes its forecast every, every month. They've had three forecasts in the last, in the last three months. I mean the picture is changing all the time (interjection)

JON SOPEL: Well, do you think it's unduly gloomy then when it says that the UK economy will shrink by 2.8% in this year.

GORDON BROWN: I've always said, it depends on what governments are going to do over the next few, few weeks. It depends on what the level of international co-operation is going to be. Look, if we do a big fiscal stimulus in Britain that gets people able to buy things and other countries do the same, then all the estimates are that that is magnified twice over; so you get twice the impact in doing so. So part of my mission really, talking to other world leaders, is to persuade them that it's important that they do the fiscal stimulus and do it as quickly as possible. This is a very complicated set of interactions that's going to happen. You've got monetary policy and people are bringing interest rates down to zero. You've got fiscal policy starting to kick in, in some countries and the level of the fiscal injection is an interesting debate about what's right and what's wrong. Now you've got this er, this er, if you like, if you like the new stage where we're trying to get the extension of lending, which means that we are trying to isolate the bad assets in different banks and you'll see other countries doing the same. So the level of international co-operation will define how quickly we can move out of this.

JON SOPEL: Well, how quickly do you think we can? Have we hit the bottom yet?

GORDON BROWN: Well that depends on - well, I think we've seen a huge amount of bad assets taken out of the banks. But what we haven't seen yet is the expansion of, of lending and one of the problems is, if I may just mention this, is foreign capacity that was in Britain, providing loans to home owners and providing help for businesses. A lot of that has been withdrawn; so even if the Royal Bank of Scotland and even Lloyds TSB … (interjection)

JON SOPEL: What does foreign capacity mean, just in layman's terms?

GORDON BROWN: Well foreign capacity is foreign banks, operating in Britain, providing mortgages, providing support for businesses and they were acting in Britain, you had Irish banks, you had American banks, you had Icelandic banks and they were all there, they were providing loans to people. They've now left or, or largely withdrawn a lot of their activity, so we have got the British banks, who are in Britain, they have got to do far more if we're going to expand capacity in the economy.

JON SOPEL: We'll come on to the banks in a moment. Just on how bad things are and where we are and what the direction of travel is. Now, I know you're not going to give us the growth forecasts, here in this interview and that will be for the budget, but the direction of travel, presumably you can give us. Do you still think the UK economy will grow in the second half of 2009.

GORDON BROWN: Well, as I say, that depends on what level of international co-operation we can, we can, we can get. (interjection)

JON SOPEL: As we sit here now in Davos? (interjection)

GORDON BROWN: Hold on. As we sit here in Davos, we are talking to the Americans, we're talking to the Europeans, we're talking to the Chinese, we're talking to countries - look, just, just get it in its context Jon. This is a global financial break-down. It's a fundamental failure in the banking system. There was nothing in Britain - in our inflation, er or in er, the way we were working our policy - that is fundamental to what caused this problem. It was triggered by the sub-prime market in the States, it spread right across the world and so you can only deal with a global problem, by having international action. And our national actions are part of it, but the international action to deal with the banking system, is, is actually the key to this resolution.

JON SOPEL: Of course.

GORDON BROWN: … resolution.

JON SOPEL: But I'm sure our viewers will all want to hear what your estimate is now about you know, you used the phrase this week of 'deep recession' . Do you think that's going to go on throughout 2009?

GORDON BROWN: Well I don't give a running commentary on what's happening when we get forecasts. But what I do say is, if we can get the degree of international co-operation that I'm looking for, then we can come through this a lot more quickly. Look, what happened, we've recapitalized our banks and luckily, other countries followed in doing so. So that stopped the banking system from collapse. We decided that we would put a big fiscal stimulus in the economy, that's really helped the families and jobs … (interjection)

JON SOPEL: And you've made this point, yeah.

GORDON BROWN: And then the third thing, what we're doing at the moment and this is absolutely crucial, I hope it's understood, is that we are trying to get the resumption and extension of lending. Now that demands of us quite big decisions. We announced how the Bank of England would change the way it was working. We've announced how we would find a way of isolating the bad assets. Now, you've seen in the last few days that Holland, er, Germany and America are looking at similar things. And of course, if we can get people working together in co-ordinated action, then the economy will move quicker out of the downturn.

JON SOPEL: Okay, so co-ordinated action and get the banks lending again. I'm sure a lot of people listening to this will think, well, Prime Minister, you as kind of almost the chief executive of some of these banks now because you know, the thirty seven billion pounds of taxpayers money that's gone in to keep them going. If they're not lending, tell them to lend. Stop being a weedy.

GORDON BROWN: I've just explained Jon that the banks are lending more. Royal Bank of Scotland and HBOS, which has now been taken over by Lloyds TSB, signed agreements with us, to increase their level of lending, that it would be as good as it was in 2007 for small businesses and mortgages. I believe that they're keeping that promise and I think the evidence that will come out in the next few days shows that that is what they've been doing. But the problem is we've lost so many other banks, who've left the country, who are not able to lend. There were investors who were not banks who were lending in the mortgage market and to businesses and we're having to replace what is the, if you like the 50% of capacity that used to provide the loans and the mortgages for home owners. These weren't the British Banks, these were non-British banks and institutions. So what we've got to do is to make sure that the British Banks are able to do even more than simply keeping to what they - the 2007 levels. And that's what the negotiations with the banks are about at the moment, so that we can see they're lending more. We're going to get Northern rock back into … (interjection) …

JON SOPEL: … (interjections)

GORDON BROWN: … lending, that's another challenge, so that we have a range of providers of money and one of them is actually now the Bank of England, because it is prepared to lend for corporate loans, directly from the Bank of England's funds.

JON SOPEL: And you've prepared to take on a lot of the risks in all of this. Doesn't that encourage the banks to carry on making the risky decisions that led to this crisis in the first place?

GORDON BROWN: No because we are signing what we call lending responsibility agreements with them in return for them receiving support from the government, including the short term help from the government now. They will have to accept the responsibility to both increase lending and to do it in fair ways. You've had a fundamental break down in the banking system because what people thought was not risky, turned out to be risk. Half the sub prime mortgages went across to Britain from America and landed people with worthless assets that they didn't wholly understand. We are now having to get these bad assets out, out of the system, but in doing so, we want to get our banks in a position to lending to families, small businesses, medium sized business with working capital and large businesses where the Bank of England is also coming - look the only reason we're doing all this -


GORDON BROWN: Is our priority is the jobs, the homes and the security of hard working families in this country and that is what it's all about … (overlaps)

JON SOPEL: There is a good deal of anger, I think you're absolutely well aware of, among the British people about what has happened in the banks and with the bankers themselves. President Obama has expressed similar anger over the bonus culture and I think you've expressed anger and yet, the new Chief Executive of the Lloyds Group, is going to get a salary of a million and a possible bonus of over twice that; it's incredible isn't it? This is - a lot of it is taxpayers money.

GORDON BROWN: Well remuneration in future will have to be based on long term results. It's not going to be based on short term dividends. There will be a report coming out about how the regulatory system in Britain will change so that it does not give advantage to people who are paying short term bonuses but does give advantage to people who are paying on the basis of long term…(interjection)

JON SOPEL: But this is our taxpayers money.

GORDON BROWN: The taxpayers, the taxpayers money is being used actually as loans for banks, which have to be re-paid, insurance schemes for banks, where the fees are taken by the government. Look, please let, let me finish. And we've got equity in the banks, on which we expect a return. There has been no free gift to the banks in this country. (interjection)

JON SOPEL: I know, but on the remuneration … (interjection)

GORDON BROWN: Everything is under - look when Lloyds TSB took over HBOS and when the Bank of Scotland was taken over and then the Royal Bank fell in to difficulty, we laid down as conditions that there would be no executive bonuses in the form of money and that dividends would not be paid. Dividends are not being paid in these companies.

JON SOPEL: Okay, just to deal with the Lloyds example and I'm sure this is something that's much more widespread but on the Lloyds example, the Chief Executive could earn three million pounds, a lot of it taxpayers money. I think fifteen times your own salary.

GORDON BROWN: The, the fact - I don't know the details of, of the Lloyds TSB arrangement. Remember that Lloyds TSB … (interjection)

JON SOPEL: But those are the figures … (interjection) the public figures. I just wonder what your reaction is to them.


GORDON BROWN: …Hold on, when Lloyds TSB bought HBOS. They saved HBOS from extinction and so Lloyds TSB was not the bank that was in trouble, it was HBOS that was the bank that was in trouble. But we laid down very clear guide lines about executive remuneration and about dividends and these guide lines should be held to.

JON SOPEL: Okay and these bankers that have landed the taxpayer with these massive bills, should they be stripped of their knighthoods?

GORDON BROWN: Well, look, come back to what we've, what we've actually done. You're talking about the massive bills. What we've actually done, and I think it's misunderstood. We didn't save the banks, we saved the people from the banks. We protected people from the mistakes of the banks, by taking action to deal with it. So every saver and every deposit is safe. Now, that is the first thing that happened after what - the changes we made. Secondly .. (interjection)

JON SOPEL: I just wonder whether your think …


JON SOPEL: … cos you're not answering my question, which was, do you think that some of them should lose their knighthoods. I mean … (interjection)

GORDON BROWN: That's not, that's not a matter for me.

JON SOPEL: It could be.

GORDON BROWN: The issue is, for me, if you get back in to all these recriminations and you just go back and back and back, we're preventing ourselves seeing what's the solution to the problem. Now there is, if you were asking positive questions about the future and how we can deal with the future, I think the public will be more interested in how we are going to deal with this problem and how we're sorting it out and how other countries are doing what we are doing, so that there's international co-operation to do so. But I think at the moment, when we're trying to deal with what is a fundamental problem in the banking system, recriminations are not as important as getting on with the job of doing it.

JON SOPEL: Okay. But there is a restless atmosphere and hasn't that been seen in the past couple of days, over this refinery strike in Lincolnshire, where people are saying that you, Gordon Brown, you were the one who stood up and said, there would be British jobs for British workers and we're seeing this whole bunch of Italians coming in and taking these jobs.

GORDON BROWN: Well, we are part of a single European market but I have always understood the worries that people have. They look round and say, well, why can't we do these jobs, jobs ourselves, these are jobs that we can do. When, when I talked about British jobs, I was taking about giving people in Britain the skills, so that they have the ability to get jobs which were at present going to people from abroad and actually encouraging people to take up the courses and the educational and learning that is necessary for British workers to be far more skilled for the future.

JON SOPEL: So are these workers right or wrong to do what they're doing?

GORDON BROWN: I think we're setting up an ACAS review to establish the facts. There are counter claims and claims that are being made, not, not all of them have been able to be proven and demonstrated and there is there is questions marks over the status; that's got to be looked at.

JON SOPEL: What is your message to people who may be thinking of taking wild cat strike action on Monday?

GORDON BROWN: That that's not the right thing to do and it's not defensible. What we've set up as a process to deal with the questions that people have been asking about what has happened in this particular instance. And look, what we've got to do over time, as I've always said, is that where there are jobs in this country, we need people with the skills, developed in this country, and that's why we're increasing apprenticeships during this difficult period, and that's why also, I'm determined that the skills level of our country improves, so that we're ready for the upturn in a more effective way that we were in the past.

JON SOPEL: I mean you've warned against protectionism and isn't this exactly the sort of, where protectionism grows, when people at times of economic difficulty see their jobs under threat and are fearful. I mean I just wonder whether you think these workers have legitimate concerns or whether they're entirely illegitimate because we have a single European act.

GORDON BROWN: Well the worries that they have about what's happening to the international are real. I mean people are worried about what's happening to jobs in every part of our country. I'm determined that we take action early, so that jobs that can be saved can be saved. We've made some arrangements to do so. Where people lose their jobs, we help them back in to jobs as quickly as possible. You'll find that no government in history is doing more to try and find ways that we can help people who are unemployed back in to work as quickly as possible. Now, there's about two million jobs change hands every month, even in, even in this downturn. There's about half a million vacancies in the country and our aim is to get people in to these vacancies as quickly as possible and we will be alert to any major redundancy and take action immediately, to deal with the consequences.

JON SOPEL: Prime Minister, you've sought in this interview to say that you have a clear strategy for the way ahead for the UK economy and you wanted to talk about …, (interjection)

GORDON BROWN: I'd like to explain it.

JON SOPEL: Okay then, go on then.

GORDON BROWN: First of all, we had to deal with the collapse of the banks, so we dealt with that and we injected money in to the banks. Every other country followed. Secondly, we had to get the fiscal and monetary policy, interest rates down, real help to families and businesses now and you see it right across the board - higher pension, higher child benefit, more investment in public works, cuts in VAT and cuts in tax allowances, all these things happening. Other countries then followed and had a huge fiscal expansion, some like America, will be bigger than ours. And the third thing to do was to deal with the problem of the extension of lending. Banks have got to lend. We had to recognize there was a loss of capacity, banking capacity in the system. So we've had to do far more. We're proposing, as America, Germany and Holland are looking at the moment, at how we isolate the bad assets of the banks, so that the good parts of the banks can get on with the lending and that they can perfectly easily do. And so that's the third stage. All of it depends on international co-operation, so this plan starts from getting the banks working again, puts money in people's pockets, encourages new investment through the funding of new investment and that's the key to the recovery.

JON SOPEL: What chance of getting that international co-operation? I know you're hosting the G20 in April.

GORDON BROWN: I think the chance is very good and we've got to work very hard at it over the next few weeks. I mean Britain will lead the way as the, the Chairman of the G20 but we depend obviously on the strength of America and Europe and also China, I'm meeting Premier Wen tonight actually, and I'll be talking to him about the major issues ahead. If we can get an agreement, this is what it's about, that the fiscal if you like, the, the real help that is being put in the economy is done worldwide, to deal with the worldwide loss of demand of the economy and the regulatory system, which has failed us, it's failed us in countries and it's failed us round the world, can be put in to place, then the confidence that is necessary to move the economy forward will be there. And I don't like hearing that people have given up and say, let the recession take its course. I don't like people saying, there's nothing that can be done. It's clearly possible to take international action, to deal both with the causes of the problem and with the way through to the recovery.

JON SOPEL: Don't you think that people would find that message much easier to accept, if as well, you were prepared to shoulder some of the blame. I know that you - we've heard you make the argument many times about that it all started in America, but there were mistakes in the UK as well. I mean there were 125% mortgages in the High Street, available. There were people borrowing many multiples of their earnings, unsustainable. There was massive debt on credit cards.

GORDON BROWN: Yeah. That's not the cause of the crisis. But let me just say that the regulatory system will change over the next few months and years. We have learned and learned that you have got to deal with the liquidity of firms as well as their solvency. You've got to monitor firms because of their international activities. You cannot just look at a firm operating in Britain, if its got massive exposures in other countries, and the regulatory system will have been tightened up. Now we created the Financial Services Authority in 1997 and it was the most modern authority in the world cos it brought together all different regulatory authorities…(interjection) …

JON SOPEL: Prime Minister, I just want to …


GORDON BROWN: … it will change over the next few years as a result of what we've learned.

JON SOPEL: But when you had this, you know, people borrowing a 125% mortgages, I mean was that … (interjection) … that wasn't prudent was it?

GORDON BROWN: Well the question about mortgages is can people afford to pay back their mortgages and there are certain instances where you've got very low interest rates and you can have a high percentage mortgage. Now that is an issue, obviously for the future, that we've got to look at what actually happened in the individual markets but the fact of the matter is the issue is, can people afford to pay back their mortgages. If you've got low interest rates, people usually can afford to pay back their mortgage.

JON SOPEL: We're there too some peculiar, I mean it's just - you know there were peculiarly British things. I mean we have a third of all unsecured European debt, is in the UK. Now wasn't that because we were borrowing too much.

GORDON BROWN: (laughs) I think you'll find …

JON SOPEL: We were living beyond our means.

GORDON BROWN: I think you'll find that this is such an inter-dependent economy that the British, not only have a massive international exposure to other countries, but other countries have a massive international exposure to Britain. This is what's called a global economy and that's actually what's happening. So yeah, 50% of the lending, for mortgages and for business loans, as coming from non British banks and non British, and non bank institutions. (interjection) … it's a description if I may say so, of a global economy. That is what happens, people are totally entangled and inter-dependent with each other. Now you can either retreat to your home base and say, no banks should be … (interjection)

JON SOPEL: The question I'm addressing is responsibility. Whether you think that there are things, mistakes that you made, when you were Chancellor, maybe with the best possible advice. I'm sure for the best possible reasons. But there are mistakes now but you feel that there are things that you know, you are clear about the way through it now.

GORDON BROWN: Well, we're toughening up the regulatory system, That is an acceptance that it wasn't strong enough to meet what was effectively, it was effectively a global financial freezing up. Now, no regulatory system in the world as I know, had ever planned for that happening. They thought, look, they thought there would be a problem in an individual institution, so you would have perhaps a Northern Rock problem and it might, had it got systemic, had effects right across the system. We thought, if we kept inflation low and interest rates low, then the economy was capable of dealing with problems as they arose. What nobody banked on was that the very systems that were designed to spread risk across the world, actually spread contagion across the world. And so when the sub-prime markets in America went wrong, securitized mortgages went wrong, other securitized markets went wrong, and it spread over the world. Now, that's the lesson that's got to be learned, that you've got to plan internationally to deal with what is essentially a financial crisis that happens all over the world.

JON SOPEL: And we talked about the fear and I want to ask you a final question. Are you fearful for what will happen to the UK economy if you don't get that co-operation?

GORDON BROWN: I'm utterly confident about the future of the United Kingdom economy. Utterly confident about our ability to work with other countries to deal with the problem. I think Britain is one of the countries that will be the great success stories of the next period of global change. Why? Because we've got low inflation and low interest rates. Why? Because we've got very, very good companies. Why? Because we've got great industries that are developing from the knowledge intensive industries, to meet environmental technologies, to advance manufacturing where we hold a very strong position. I've utter faith in our ability as a British people also, to come through difficulties, to realize problems, to be resilient in facing them and then to see that we can actually solve these problems by working together. And I think British people understand that despite all the problems that we have had in the international economy over the last few years, that Britain is a strong country and ready at to come through what are real difficulties, but Britain has always met difficulties.

JON SOPEL: Is this in the coming months or coming years?

GORDON BROWN: This is in the coming months. We take the action that is necessary immediately and you'll see that other countries will be following some of the action we've taken in the next, in the next few days and I think if there's an essential understanding, it's that you've got to work together, global action, is an essential way of solving what are essentially global problems.

JON SOPEL: Prime Minister, thank you very much.


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The Politics Show Sunday 1 February 2009 at 1200 GMT on BBC One.
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