On the Politics Show, Sunday 29 March 2009, Jon Sopel interviewed Alistair Darling, Chancellor of the Exchequer.
Alistair Darling - interviewed by Jon Sopel
JON SOPEL: The Chancellor of the Exchequer, Alistair Darling is with us. Welcome to the Politics Show.
Thanks very much for being with us. So, is it fair to say that the future of the world's economy is riding on what happens this week in London.
ALISTAIR DARLING: Well it's important and it is all about jobs at the end of the day, jobs and how we can get economies moving again and do it in a sustainable way; so it's a big agenda but you know, I really think it's incumbent on each and every one of us, sitting round that table this week, to do everything we possibly can to get our economies going again, to have them - particular in the front of our minds, the problems that some of the emerging economies are now facing, and to ensure that whatever we do, we make sure that we don't go back to business as usual, that we do make sure we've got a lasting system in place after that.
JON SOPEL: So can you put a number on it, can you say, this is how much money we need to put in to the global economy, to stimulate it, so that those jobs are created.
ALISTAIR DARLING: No, I, I think what we need, you need to do is this. Firstly, no one is suggesting that leaders or finance ministers come along with, each with their own new budget on Wednesday or Thursday, we're not talking about that. A lot of countries have already put a substantial amount of money in to the economy, we have, the Germans have, the United States have, Japan has, and we will continue to do more. What we'll be discussing this week is, er, are hopefully to get an agreement that we will do whatever is necessary for as long as it is necessary but I don't think it will be a case of saying well, this number is right, that number is wrong. Of course, we've put a lot of money in to the economy just now. We have to ask ourselves, where else do we need to put support, particularly in some of the international institutions where I think the IMF will be looking to very substantially increase the resources.
JON SOPEL: So that sounds like the sort of, I don't know, we're going to get the vague communiqué that you've seen in previous summits that the Foreign Office Minister, Lord Malloch-Brown was warning against.
ALISTAIR DARLING: No, I think, I think you'll get a number of things. Firstly, I very much hope we will have a commitment, as I say, from governments, to do whatever is necessary. There won't be the same amount in every country and they may do it at different times in different ways, but the fact is if you look at the G20 countries, nineteen out of the twenty, have committed themselves to doing that. Secondly, on supporting, getting more money in to the IMF, I'm sure we will get an agreement on that cos we really do need to help those developing countries. I think you'll also get agreement on boosting trade on, on, certainly on the need to clear up the - improvement the regulatory system, to stop this sort of thing happening again.
JON SOPEL: We saw the Chairman of the Treasury Select Committee in Paola's film there, talking about we do need a second fiscal stimulus. Can we afford it?
ALISTAIR DARLING: Well, I'll have to reach a judgement in the budget in three week's time, as to what I think is necessary. As you know we put a very substantial amount of money in the economy last November, since then, I've given the Bank of England more fire power to get credit going, cos we've got to kick-start credit in the economy and I will have to decide what further measures may be necessary. One of the key things in the front of my mind for example, will be the very point in that film, and that is the need to make sure that as people lose their jobs, we help them get back in to work as quickly as possible, so the - with any judgement that will have to reach.
JON SOPEL: Look. Would you accept that there is a fundamental disagreement. I mean we've had Angela Merkel this week, the German Chancellor saying, I will not let anyone tell me that I must spend more money. I and my colleagues from the EuroZone, ie the rest of Europe, believe there is no room for a new fiscal stimulus.
ALISTAIR DARLING: Well look, of course round the table you will get difference of emphasis, but if you take Germany for
JON SOPEL: That's not a difference of emphasis, that's a difference of view point, fundamentally.
ALISTAIR DARLING: Germany has already, through two fiscal stimuluses put money in to its economy - it's about the same as we have and about the same as the Americans - they like us, like the Americans, will continue to look at their economies and then make a decision at their budget time as to what they think is necessary. Now as I said to you, we are not saying that everybody has got to do the same thing at the same time, on the same day. What we do need to do make sure that we have a commitment for countries to act together and do what is appropriate in their countries, and by acting together in that way, the effect is so much better because it's happening right across the world.
JON SOPEL: And do you believe we, Britain, can afford a new fiscal stimulus, I mean Mervyn King has more or less said we can't, the Governor of the Bank of England.
ALISTAIR DARLING: What Mervyn King was saying and he's right about this is that all governments have to take a cautious stance but we do need to make sure that need to make sure that we do whatever is necessary to get the economy going. Put it another way, suppose we had taken the Tory advice for example and we said, okay, you don't do anything. Let recession take its toll, the cost would have been far far more, now Mervyn King and I discussed last November's support for the economy
JON SOPEL: Mervyn King sounds like he's more or less exactly on the same page as the Conservatives
on the need for extra spending.
ALISTAIR DARLING: No, Mervyn King was fully supportive of the spending that we announced last November. He and I jointly signed up to the statement of Finance Ministers, three weeks ago, where we said we would need to support the economy again and he also said last week, he said for example, you might have to do more to tackle unemployment. So he's in a completely different
JON SOPEL: You weren't surprised then by what he said at all.
ALISTAIR DARLING: No, no I wasn't.
JON SOPEL: Genuinely?
ALISTAIR DARLING: No. Course I wasn't.
JON SOPEL: Can you name me another occasion when a central bank governor has come out and actually said, I've got this view on government fiscal policy?
ALISTAIR DARLING: Look, I speak to Mervyn King, all the time, as you might expect because the Chancellor and the Governor do need to speak to each other all the time, so no, I wasn't surprised and you know, he, he would take exactly the same view as I would on these things. You've got to ensure that yes, you support your economy now, but you've got to have a very clear eye on what is going to happen in the future. I've make sure on a number of occasions, you have to balance the necessity of taking action now, with the fact that like any other country, you've got to within your means in the medium term, so there are two sides of this: support the economy now, but you've got to balance that with the need to
JON SOPEL: Just as we're talking about it, I just would like to each in to - we've got the quote from Mervyn King, 'There is no doubt we are facing very large fiscal deficits over the next two or three years. Given how big those deficits are, I think it would be sensible to be cautious about going further and using discretionary measures to expand the size of those deficits. I mean that is, you know central governors normally don't even say that.
ALISTAIR DARLING: Yes
JON SOPEL: This is him saying, stop.
ALISTAIR DARLING: No. These are extraordinary times when countries right across the world are putting more money in to the economy than they would normally do. Deficits have been rising, borrowing has been rising and that's been happening because it's the right thing to do but if you go on and read the rest of what Mervyn King said, he said, you governments would need to consider measures, for example to help employment, targeted measures like that and you know, he's right, I said on numerous occasions, you need to be cautious, but at the same time, you've got to recognise that you are in an extraordinary set of circumstances - when was the last time we saw the world's economy taking such a sharp downturn, not just in one region or one part of the world, right across the world we've got this extremely serious situation, which means we've got to try to do our best, to deal with these. It's not going to get sorted, it's not going to get sorted out in one day or one meeting, but you've got to ensure that you take the necessary action to support your economies and equally, you've got to make sure that it's sustainable in the medium term.
JON SOPEL: Was Gordon Brown as relaxed about the Governor's comments?
ALISTAIR DARLING: Yeah, look Gordon and I are in complete agreement as you might expect, both in what
plenty of reports that you're not.
ALISTAIR DARLING: Yeah, but you know, you know we talk about these things, we discuss these things, both of us know that you've got
JON SOPEL: There is no difference of emphasis between number ten and number eleven?
ALISTAIR DARLING: No there isn't. Both of us are two - are very clear on two things; one is you need to support your economy, you need to support jobs, you need to make sure that we get bank lending going, to kick-start credit in the economy and you also need to be taking steps with other countries, as I say, to help the emerging economies that are in difficulties. You also need to make sure that you balance that with the fact like all countries, you've got to live within your means and those two elements are critically important.
JON SOPEL: It wasn't a coup d'etat that was launched against you by - I mean there was a fantastic quote from Vince Cable, who seems to mint these things pretty well, the Liberal Democrat's Treasury Spokesman, We had a very British coup d'etat when the Governor of the Bank of England sent his tanks down the Mall, effectively ceased control of the British economy, through his command of monetary policy and put the government under house arrest.
ALISTAIR DARLING: Yeah, but look, Mervyn was simply setting out his view that Governments do need to be careful, caution is the watch-word of most Treasuries but equally that - he is not arguing that we should do nothing, far from it, he supports what we've done so far. What he is saying, what I've been saying is, we may need to do some more to keep the economy going, to support jobs
JON SOPEL: I understand completely (interjection)
but equally you've got to live within your means.
JON SOPEL: Chancellor, I understand completely that you are trying to play this down. I'm sure you don't want headlines that there is a split between the Chancellor and the Governor or the Chancellor and the Prime Minister.
ALISTAIR DARLING: And you're trying to play it up.
JON SOPEL: No. You're a historian of these things, can you name me another occasion when the Governor of the Bank of England has come out and publicly, publicly warned the government about its fiscal policy, that's my question.
ALISTAIR DARLING: Yeah, what Mervyn King . (interjection) I'll come back next week if you like and we'll go through all, everything central bank governors have said here and in other parts of the world. What Mervyn King was saying is that of course governments have to be careful. I believe we have to be careful. As I as I said before, we put a lot of money in to the economy, a lot of it is working its way through, it will have an effect, it will help us get through to recovery, but equally, taking no action at all, simply standing up would be disastrous. Mervyn King is not arguing that, I certainly wouldn't argued that, the Tories are arguing it maybe. I think that's the wrong course of action.
JON SOPEL: Let me, David Cameron has been making a speech this morning and he said that the - It is morally irresponsible to rack up more debts for our kids to pay off. Just on that moral question, he's right isn't he.
ALISTAIR DARLING: Well I'd say it was morally irresponsible to stand back and do nothing in the face of what is one of the biggest crises the world had seen for generations.
JON SOPEL: So let borrowing rip (?)
ALISTAIR DARLING: No, no far from it. You've got to keep borrowing under control and as I've said to you, you do need, in doing everything you can to protect jobs, to kick start credit, you've also got to make sure that in the medium term, you live within your means, both sides are important, both sides, I would argue are absolutely essential.
JON SOPEL: But then will we see, in your next budget, which is only three weeks away and I know you're not going to go in to the detail of it but a detailed plan of how we're going to pay back all this borrowing that we have now accumulated, making us
ALISTAIR DARLING: Well, if you look at the pre-budget report last autumn, I set out there, not just measures to support the economy now, but also I said that some taxes, national insurance would have to rise to help pay for it, so that's an example of how I was showing, yes I'm allowing borrowing to rise just now, and most economists, most people think that is the right thing to do, faced with a down-turn like this, when it comes to the budget in three weeks time of course I will set out whatever proposals I may have, but I repeat the point, it would be wrong, it would be indefensible to stand back as we did in the '80s and the 1990s, to leave people on the dole and right off an entire generation - we've been there before and I think that Tory prescription is quite wrong. You do need to support the economy but equally, you've got to be clear at the end of the day, you've got to pay for it.
JON SOPEL: Let's talk about the pre-budget report, about how the fiscal stimulus that you introduced then is working. What has the cut in VAT achieved?
ALISTAIR DARLING: It's put twelve and a half billion pounds in to the economy or will do over a thirteen month period. I made it clear at the time
JON SOPEL: Do you think it's working?
ALISTAIR DARLING: Yes it is because it - and indeed, if, if you look at the figures earlier this year from the ONS, you will see that it was working. But this is something, you know it isn't, it isn't something you can judge on one day or one month - it was not just for Christmas, it was for thirteen months and the objection was to put money in to the economy now. It's not the only thing I announced, for example, from the 6th April, basic rate tax payers will be paying less tax. We've increased the amount of money going in respect of child benefit, we're increasing the state pension; so it isn't the only thing we're doing, far from it. There were other measures too that will also make a difference.
JON SOPEL: Why has no other country followed your lead on it, if it was such a good idea.
ALISTAIR DARLING: Because as I said to you, each country will decide what is appropriate in their own economies. I'm not saying that everyone should do what we are doing, any more than some of the measures that other countries are looking we would implement. The important thing is you're putting money in to the economy, and by putting money in to the economy, it will mean that you can help keep it going and you can help - there's a better chance therefore if people lose their jobs, to get them back in to work.
JON SOPEL: So your former cabinet colleague, Stephen Byers is wrong then, when he says this is a policy that has run its course. (interjection)
ALISTAIR DARLING: I don't agree with him and I certainly don't think you should start chopping and changing. Once, once you, once you've set out on a course like this, which you know, I did last November
JON SOPEL: A lot of people think this is twelve, this is twelve and a half billion pounds down the gurgler
ALISTAIR DARLING: It is twelve and a half billion pounds going in to the economy, it's not the only thing, as I said, there's other measures that are coming too. But the key thing and you know, other countries are doing this - they are putting money in to their economies, the Germans are, the French are, the Japanese are, the Koreans are, there's not - you know saying - nineteen out of the twenty G20 countries that will be sitting round the table later this week, they are supporting their economies to a greater or lesser extent.
JON SOPEL: I just want to ask, get a final thought from you on the G20 itself. Do you, I mean, in the introduction I talked about the London Conference in '33 and Bretton Woods, you know, which set up the IMF during the second world war, do you think this is as big as that cos I rather got the impression you thought, well this is a staging post, you know, let's see, kind of
ALISTAIR DARLING: Look, yeah, it is important. It's different, it is important but it isn't the end, it's not the end of the process, it is part of a continuing process because I reckon this week, we will get agreement on a number of issues, you know, I've mentioned the support for the emerging economies for example, a commitment to get trade going again but this won't be the end of it, it will be necessary for us, for other countries, to continue to do more. Take one example, you know the need to get bank lending going again - that will take time, but it's a process that we've got to be realistic about it. We shouldn't be you know overly optimistic that everything will get sorted in one day. It's a process but one thing is clear, if you don't show the determination or the willpower, then I think people will not forgive us.
JON SOPEL: Okay, but the one thing you didn't say that you thought you'd get detailed agreement on is a stimulus package. Do you that's unlikely to come, that there will be a fixed sum 'x' you know, 'x' billion pounds, 'x' trillion pounds.
ALISTAIR DARLING: I think you will get an agreement that there does need to be stimulus in the world's economies, but as I said to you, it must be at the end of the day, for individual governments to work out what they need to do in their own economies.
JON SOPEL: Chancellor, while we have you here, I want to ask you about the Dumferlime Building Society and I know viewers in Scotland are going to be able to watch the Chairman of the Dumferlime in a few moments time, but is everyone's money safe there.
ALISTAIR DARLING: Yes it is and the Dumferlime will be open for business on Monday in the normal way, people can get their money out, but I've been very clear throughout this, whether it's Dumferlime or any other institution that one of of our first priorities is to protect savers money and I will make sure that happens.
JON SOPEL: Why isn't the Dumferlime being bailed out in the way that others have been bailed out. I mean the Chairman, we spoke to this morning, he says, The only person we've spoken to from the Treasury since last October is Lord Myners and all he's offered us is tea and sympathy. The Chancellor may want to return my phone call when he gets a minute. Have you not even bothered to speak to him.
ALISTAIR DARLING: He's been talking to the Financial Services Authority since last October, but let me explain what's happened in the Dumferline. This is you know, a building society that unfortunately, took out loans in commercial property, over six hundred and fifty million pounds. It bought in the last couple of years or so, some mortgages from an American company that had gone bad. It's had to write-off some of its IT systems because of difficulties its had and it needed between sixty and a hundred million pounds to keep it going. When you bear in mind that the Society has never made more than about you know, five or six million pounds a year in the recent past, it couldn't even service that sort of loan, let alone repay it. Now, we've tried, we've talked to the regulator for weeks about this and I would have liked to been able to do something but we couldn't be in a position where we put money in to it knowing that they couldn't even service it or repay it back. That's why I mean, (fluffs), even as we speak, there are intensive discussions going on to try and resolve this to firstly and foremost, to make sure that savers money is safe, but we want to do the best we possibly can to support this and it will mean public money involved, so you know, there will be public money involved here, but I want a long-term future. There's no point in doing something .. kept it going for maybe a few months and we're back to square one again. I want to get a long-term settlement here.
JON SOPEL: Chancellor, thank you very much for being with us.
ALISTAIR DARLING: Thank you very much.
END OF INTERVIEW
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The Politics Show Sunday 29 March 2009 at 12:00 GMT on BBC One.
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