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Last Updated: Sunday, 11 September 2005, 10:28 GMT 11:28 UK
Fuel, finance and politics
On Sunday 11 September 2005 Andrew Marr interviewed Gordon Brown MP, Chancellor of the Exchequer

Please note "BBC Sunday AM" must be credited if any part of this transcript is used.

Gordon Brown MP photo: Jeff Overs
Gordon Brown MP, Chancellor of the Exchequer
ANDREW MARR: Well, a new political and as regular as autumn stories in the papers about when Gordon Brown's going to take over from Tony Blair. He must be completely sick about reading this stuff at the moment.

The more substantial challenge right now is on fuel prices and their impact on the economy, subject to a meeting of the EU Finance Ministers yesterday. Now, Gordon Brown is off to the TUC for a big speech on Tuesday. But this morning he is here, Chancellor, welcome.

GORDON BROWN: What a pleasure to be at the start of a new programme.

ANDREW MARR: It's very kind of you to come here.

GORDON BROWN: Art, music...

ANDREW MARR: Art, music and everything. We'll go through all of those subjects in due course. What is your sort of instinct about the effect of the oil price rise on the British economy, and on your revenues. I know it's very early to tell in great detail..

GORDON BROWN: I understand the frustration particularly of hauliers, where the competitiveness is affected by rising petrol and diesel prices. But I think most British people do understand that this is a global problem. It's a global challenge and it's got to be met by global measures.

And that's why yesterday I was in touch with the Saudi Arabian Finance Minister. I'm going to be meeting OPEC Ministers, the European Union itself under the British presidency will be talking to the oil-producing countries. And what we need to do is three things basically, immediately. One is we need to get agreement on increased supply.


GORDON BROWN: This is a problem where demand is rising particularly in Asia and supply has not risen to meet that demand. Now I believe we...

ANDREW MARR: ...pump out more oil...

GORDON BROWN: Pump out more oil...


GORDON BROWN: Well, what we need is transparency in the oil business. We need to know what the reserves are. We need to know what's being done, year to year. We need to know what each country plans to do. If OPEC has a purpose and it's a cartel of course, and I think it's under challenge, it's got to show that it can create stability by being transparent.

So we need an opening of the books. And the third thing we need is that the oil-producing countries and particularly OPEC, use the $300 billion, they'd gain $300 billion from this. And they use that to invest in new capacity, and of course in America particularly, we need new refining capacity.

ANDREW MARR: This is all new...

GORDON BROWN: Then we've got to look at - and you raised this at the beginning of the programme - at these climate change issues, energy efficiency, alternative supplies of energy. And I believe by the time we get to the end of the month with the IMF and world bank meetings, and I'll be chairing some of these meetings, we will see progress in each of these areas.

ANDREW MARR: All of this is fine. But if you are using a lot of fuel at the moment you regard the amount of tax being paid as pretty eye-wateringly huge in this country. Certainly bigger than in most other countries. There have been stories that you are prepared to freeze fuel duty to help people out a little bit. Are they ....

GORDON BROWN: I did freeze fuel duty. I announced it only a few weeks ago, that we were freezing fuel duty.

ANDREW MARR: But looking ahead to the next...

GORDON BROWN: Looking ahead I'll make any announcement in future months in the pre-budget report and beyond. I am aware of the challenge that hauliers face, I'm aware particularly of the problems that low income families face with petrol prices going up. But think everybody knows that whereas five years ago there were different problems in the country, this is indeed a global problem.

It demands global solutions. If the price of oil doubles across the world over only 18 months. If China is now taking nearly 10% of the oil demand of the world, then you need either to have an agreement on increased production capacity from the OPEC countries, or we've got to provide increased production elsewhere. And that's why we...

ANDREW MARR: And we all use a bit less...

GORDON BROWN: That's right. We're talking to Russia, we're talking to Norway, we're talking to all the other oil producers outside OPEC as well. Global problems demand global solutions and if anything has been learned this year from the Tsunami and from other events that are happening round the world, you need that degree of international co-operation to solve these problems and I think the British people do in a common sense way understand that that's what the issue is.

ANDREW MARR: A pound a litre nonetheless. Are you really going to let that spread across the country?

GORDON BROWN: But I believe we can get oil prices down. These initiatives are about ending a situation where we have oil prices continually rising as a result of, partly of demand, partly of some speculation involved in the, partly of the problems of course in America as a result of New Orleans. I mean, this is where the supply stopped and we've got to make sure that the supply can continue, refining capacity can be brought back on stream. I've been involved in this over the last....

ANDREW MARR: Would you intervene to stop a pound a litre?

GORDON BROWN: Well what we've got to do is to make sure that the supply of oil increases, and the price of oil comes down. I mean, nobody's going to come onto this programme and give blanket commitment to that particular prices because these are outside the control of individual governments. These are about world oil prices essentially...

ANDREW MARR: It does suggest that market rules at the end of the day...

GORDON BROWN: Well market forces and OPEC of course. Because you've got a cartel that has limited production in the past. They have been slow to respond to rising demand. I spoke to the Saudia Arabian Finance Minister as I said yesterday, and I will speak to the other OPEC members in the next few days. I will meet them very soon, and they have responsibilities as well. And I think the public, you know, do understand that stability is all important here.

And what we want to do is to deal with an oil shock which is as big as the oil shock of the 1970s, it's as big as the oil shock of the 1970s in terms of its effect on the world economy. But we can deal with that oil shock in a stable and effective way by taking the right measures, and that means analysing the problem properly and dealing with it in a common sense way.

ANDREW MARR: In the Seventies the oil shock had a devastating effect on the economy for a while. Back at the time of the election you were very clear that there was no need to raise taxes, that the books would continue to balance. Has anything happened since the election to make you revise that judgement?

GORDON BROWN: It's because we have pursued a policy of stability and will continue to do so. In other words we will keep a low inflation economy. I was talking obviously to the Governor of the Bank of England at the weekend about these matters.

We will keep a low inflation economy but I think people can look forward to a continuation of stable growth. Now, in a high inflation environment, when people react in the wrong way when you have a problem like oil prices, you get instability and in past times when we've had oil shocks we've had recessions.

ANDREW MARR: Inflation is bubbling up a little bit is it?

GORDON BROWN: Inflation has been kept under control by the judicious policies of the Bank of England where they've acted quickly in raising interest rates last year. They've been able to reduce interest rates of course this year and I believe the pursuit of policies of low inflation which we're all determined to do, around which you know there's a national consensus.

People said when we made the Bank of England independent there was a danger of wage negotiating, putting inflation out of control. We've helped inflation under control.

ANDREW MARR: Mervyn King is a little worried about it isn't he?

GORDON BROWN: But of course when you have a doubling of oil prices and you have commodity prices going up around the world there is an inflationary pressure...

ANDREW MARR: What I don't understand is what you think the overall impact on revenues is going to be after what's happening to oil. Do you get in enough to make sure that you don't have to raise taxes across the board, or is it actually going to be, is it going to mess up the books?

GORDON BROWN: It's effectively neutral at the moment. Because you have additional revenue of course because the oil companies are making more money and therefore there's more money in corporation tax but companies are affected because they have higher fuel prices and their profits inevitably are affected by that.

So there is no huge revenue effect on the economy one way or the other. And I think sometimes people fail to understand that. The most important thing....

ANDREW MARR: So nothing fundamental has changed since the election in terms of government's revenues, prospect for taxes.

GORDON BROWN: I think I'd like to assure you, in terms of the policies that we pursue where stability is the basis of everything we do, the ability to take the tough long-term decisions when they've got to be made as we did by making the Bank of England independent, or as we've done in other instances by cutting back where it's necessary, like 80,000 Civil Servants are having to go as a result of our reforms. We continued to be prepared to take the tough decisions because the basic policy which is unchanged, and I think you can see it by the economy continuing to grow, is that we will pursue a policy of stability.

We will be unwavering in that and I will tell the TUC on Tuesday that that is our policy, we will not tolerate inflationary pay settlements at this time, particularly when we are under pressure from fuel prices. And the reason that I think I can be confident about the future is that the British people do understand that this policy of stability has yielded results in the last eight years.

ANDREW MARR: Rationing. Is there any plan at any level of government that you are aware of, if things carry on in the way they have been doing, to introduce rationing at petrol stations?

GORDON BROWN: I think, I think you're referring to a DTI document that is unrelated to this petrol issue at the moment, which is about the normal contingency planning that any government's got to do because we have either some natural problem like ....

ANDREW MARR: But you haven't been sitting in on meetings?

GORDON BROWN: No, no, none of that. And let me just say that the way we will deal with this is in a common sense and stable and effective way. And I think it's by identifying what the real problem is and I think most hauliers as well as the farmers who depend on fuel, understand that the real problem is a global challenge. But we Britain will lead the way with other countries in meeting over the next few weeks.

ANDREW MARR: So there's a plan but it's an old plan, really, it's not related.... OK. Can I ask about China. Because that's something else that you've been thinking about a lot.

GORDON BROWN: And I visit China again next month.

ANDREW MARR: What strikes me is, you know, we're about to be hit or we're being hit by this massive wave of cheap products that are beginning to rise in price from China but they're still pretty cheap. They will have a huge impact on lots of our businesses, lots of individuals.

Had this happened at any earlier stage in our political history the great political parties have been driven by arguments between free traders and protectionists. There is not a single serious politician anywhere who stands up for protection or tariff controls. It's pretty off that, isn't it?

GORDON BROWN: I think it's fascinating. You're looking at Britishness today. In the rest of Europe there is a protectionist movement undoubtedly so. In America...

ANDREW MARR: Is it serious?

GORDON BROWN: I think these are pressures that we've got to deal with. But look, the only answer for an economy like Britain and the long-term challenge we face, is to face up to this competition, not try to shelter ourselves from it, not try to ignore it, not to freeze frame China is here to stay. Asia is going to produce more goods than Europe, and that is a huge shift in power in the world economy.

But Europe can respond and particularly Britain by moving up the value added chain, by having better quality products, by having skilled labour that we're able to sort of sell to the rest of the world with better products, by our scientific invention.

And you know, I think Britain, I think this is a theme that I think people will understand more, partly because we're talking about the future with the Olympics and everything else. Britain is better placed even than America, to meet the challenges of the future, because we're open and we're outward looking. Because we believe in scientific enquiry and it's science and technology that's going be the results....

ANDREW MARR: This is the Britishness agenda and why it matters?

GORDON BROWN: I think the Britishness agenda matters because you need to meet the challenges of the future.

ANDREW MARR: Let me ask you about a fellow Scot. It's the first time we've talked since Robin Cook died so suddenly. It was said at the time, but before he died, that had he lived and you gave a wonderful eulogy to him, you would have brought him in as possibly as Chancellor of the Exchequer, Foreign Secretary. Would he have come back in a Brown government?

GORDON BROWN: Well, you can't speculate about the future, whether there will be a Brown government, who would be in it.

ANDREW MARR: You must assume there's going to be a Brown government.

GORDON BROWN: ...but what I can say - you can speculate - but what I can say is that we didn't value Robin's contribution enough. You know, his son read at Robin's funeral, one of Robin's articles, I think written in the Guardian, about the reform of Parliament. And it was the most brilliant interpretation of both the importance of Parliament and its irrelevance to large numbers of people. And Robin did have an insight into why people were disengaged from politics, what we have to do about it, how we had to build trust in the political process, why political parties had to change. And I was learning all the time from my discussions with Robin...

ANDREW MARR: ...he was an extraordinary man, he was an extraordinary man.

GORDON BROWN: He was an extraordinary man. But the basic theme that was the theme of his life was social justice.

ANDREW MARR: Social justice. More of that from a Brown government, if it happens. Thanks a lot.

GORDON BROWN: More enterprise.


NB: this transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy

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