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Last Updated: Sunday, 3 December 2006, 11:13 GMT
Fiscal policy
On Sunday 03 December, Andrew Marr interviewed George Osborne MP, Shadow Chancellor

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

George Osborne MP
George Osborne MP, Shadow Chancellor

ANDREW MARR: Moving on to the House of Commons where on Wednesday the Chancellor is going to stand up and deliver his pre-Budget statement.

That's his tenth and his last as half of the Blair-Brown double act. Gordon Brown will no doubt trumpet his record but critics say the country is beginning to run into trouble.

But they also say they don't really know what the Tories would do on spending and taxes, the Shadow Chancellor is George Osborne, let's hope he can help us on that. Welcome, thank you for joining us.

GEORGE OSBORNE: My pleasure.

ANDREW MARR: There is a sense that with all these reviews and everything on climate change to transport, the Chancellor has got a forward-looking vision that's pretty concrete.

And people feel that the Conservative Party is still a little nebulous, a little bit misty when it comes to things like taxes and spending.

GEORGE OSBORNE: Well I mean first of all I'd say you, you know Gordon Brown has been Chancellor for ten years and producing yet another report on transport, or yet another report on skills or planning, after ten years of these things, does not equate to actual action on the ground, doesn't actually lead to our roads being less congested.

In terms of our approach, I think it's right at this stage, you know I will not be presenting a budget, if the British people vote us in, until probably 2009. And it wouldn't be responsible to set specific policies on taxation now. But instead to offer a general approach. And I think we're quite straightforward in our approach.

One, let's have a simpler and more competitive tax system, second, let's get a control on public spending so that government doesn't grow bigger than the economy, and three, third, let's sort out our public services. As we speak there are accident and emergency wards, maternity wards across the country that are closing despite a doubling of the health budget. So reform of public services is a third element. So, you know, I think it's right at this stage Andrew, a couple of years before a general election, to be setting the framework of economic policy rather than trying to write a budget three years before I might deliver it.

ANDREW MARR: Fine. But what do you say to somebody watching, Conservative Party supporter for instance, middle income, lower to middle income person. Yeah, but what I want to really know, want to be reassured that after a Conservative government I will be paying less tax than after ten years of Labour?

GEORGE OSBORNE: Well the first assurance I've got to give that person is that there will be low interest rates and low inflation, and that economic stability comes first.

I regard that as the primary responsibility of a Chancellor of the Exchequer. And that also requires sorting out the public finances.

Well Gordon Brown will have to say when it stands up on Wednesday in the House of Commons is that we actually have the worst structural budget deficit in the whole of Europe, worse even than Italy, a country he normally compares us to. So we have to have sound money. I would like over time, of course, as a Conservative, there to be lower taxes and that is certainly my intention.

But I'm not going to make promises about tax cuts that I cannot deliver on. And so I would rather, when I know I'm in a position to deliver lower taxes, when I know that doesn't jeopardise low mortgage rates and the like, to make those promises. I'd rather over-deliver rather than over-promise.

ANDREW MARR: David Ruffley, your Welfare spokesman, said that governments should be judged on how well they delivered for the people at the bottom, the bottom ten per cent. Do you agree with that?

GEORGE OSBORNE: I think that's a very important test, absolutely. And...

ANDREW MARR: So, what would you do to deliver to the bottom ten per cent?

GEORGE OSBORNE: I mean it's very interesting. Gordon Brown has sat on programmes like this for ten years, and the truth is that the people in the most entrenched poverty in our country, less than 40% of median income, to use the technical phrase, has actually grown by several hundred thousand.

ANDREW MARR: These are people out of work ...

[Speaking over each over]

GEORGE OSBORNE: I think we need, you know at the moment we have a sort of one club golfer approach. We throw money at them through the tax credit system and that's not particularly well administered, as anyone who's caught in the tax credit net knows.

I think you, of course there is income redistribution that goes on and has always gone on under different governments.

But I think we need to try lots of other solutions, we need to raise aspirations in education and we'll be saying something about social mobility and focusing on core teaching in the next couple of days. We need to tackle issues like drug dependency and mental health which are often a real problem for people at the bottom of society. And we need to, I suppose, get people climbing up the ladder of opportunity.

The bottom rungs of that ladder have been broken and as I say, I would argue that Gordon Brown and Tony Blair's approach has been to focus on the outcome to be focusing entirely on the income these people receive rather than trying to solve some of the problems that has, as I say, ... poverty become more entrenched in this country.

ANDREW MARR: This sounds admirable. It sounds the kind of thing that Polly Toynbee might be saying or the Labour Party's been saying, everyone's talking about this kind of thing. Can you give me one specific example of something that you would do, and they don't do?


ANDREW MARR: To help these people.

GEORGE OSBORNE: Yeah. I mean I think I'll give you one example. I think there should be a great deal more effort on drug rehabilitation.

I mean, obviously for people, drug dependency is a massive problem at the bottom of society, I mean when I say the bottom of society people on the lowest incomes, people in the greatest risk of social exclusion and there's simply not adequate supply of drug rehabilitation...

ANDREW MARR: You'd spend money on drug rehabilitation that's not being spent now?

GEORGE OSBORNE: I think we would shift resources within the health budget, spending money on drug rehabilitation. And indeed, much of our approach to law and order, and this has come in for some criticism from some commentators on the right of politics.

It's not just about having stiff sentences, but also tackling what Tony Blair said he was going to tackle all those years ago, the causes of crime, and get into these communities, use social enterprises, use voluntary groups, use charities to reach parts of society that large state bureaucracies don't get to. And I think, you know, my criticism I suppose over all criticism of this government is they tend to believe that you can pull levers in Whitehall sitting behind your desk as Chancellor.

ANDREW MARR: ...the levers aren't working.

GEORGE OSBORNE: ...and somehow they're connected to the ground, and they're not. And we can see that because as I say, the number of people in entrenched poverty is rising in this country.

ANDREW MARR: Let's turn to environmental taxes. Can you say now that if you were in power driving would cost more?

GEORGE OSBORNE: Well I can set out a general approach. (talking over each over) I'm going to respond to your specific point about driving. I would like to see a shift in taxation, away from income and investment and the things that generate a prosperous economy and help families, onto pollution.

You know, pay as you burn not pay as you earn is the phrase that I come up with. And that involves an increase in green taxes but these are replacements for other taxes. Now of course, some of the major areas are taxation of motor cars, taxation of aeroplanes, and taxation of industry.

ANDREW MARR: So the answer to my question really is yes?

GEORGE OSBORNE: Well we've set out our approach just in the last couple of weeks towards industry. We want a carbon levy which would be levied on the taxies, on the pollution, the carbon pollution they emit. And we've explained how that would work. And, as I say, we said that there would be other reductions. So we will look over the next couple of years at taxation of transport, both road and air.

But as I say, on road pricing, we are sympathetic to the concept of road pricing. I've got constituency in the north-west of England and I can see the M6 toll road has brought great benefit. But I think road pricing should be linked directly to improvements in transport infrastructure and should not be used as an excuse to increase the overall level of taxation.

ANDREW MARR: Are we talking about tax on air tickets, yes or no?

GEORGE OSBORNE: What we're talking about is a shift of taxation from income and investment onto pollution. I know you're trying to pin me down.

ANDREW MARR: It's only the people watching who want to know clearly what you...

GEORGE OSBORNE: But Andrew, if you had the Chancellor of the Exchequer sitting here, who's delivering a pre-budget report in three days, he would not answer those questions. You're expecting...

ANDREW MARR: He would probably give me some pretty clear indications.

GEORGE OSBORNE: He would not...

ANDREW MARR: ...as to whether he thinks people should pay more for flights.

GEORGE OSBORNE: Andrew, Andrew, if you asked him today whether in three days' time, you know, you're smiling! You know he would not tell you what he's going to do!

ANDREW MARR: I'm smiling for all sorts of reasons.

GEORGE OSBORNE: No, you know he would not tell you what he was going to do with air passenger duty. And it is simply not reasonable to expect someone who is going to deliver a budget in two or three years' time to tell you exactly what they would do with road duties, air passenger duty. I've set a general approach which is shift taxation from income onto pollution.

ANDREW MARR: Let me ask you about one other specific area which is this very, very sad Farepak story. I don't know if you've seen, the FT, the Financial Times, did a very interesting story about doorstep lending - people going round vulnerable people desperate to have a decent Christmas, and persuading them to borrow at a rate of interest going up to 365%.

GEORGE OSBORNE: Yes. A total disgrace. Completely unacceptable. And I think we need real action on these home credit companies. People get locked into these home credit companies because what happens is they strike up a relationship with one company, they are not allowed then to transfer to another company to get more competitive rates.

I think we need action on that and indeed we are in discussion with organisations like the Citizens Advice Bureau as to how we can tackle the particular problem of these home doorstep lending companies. But also, how we do things like improve education in schools so that people actually know what an APR is...

ANDREW MARR: Numerate, we could all do with a bit more of that. And you'd legislate on those issues?

GEORGE OSBORNE: Well those that required legislation would of course have legislation.

ANDREW MARR: All right, George Osborne, thank you very much indeed for joining us.


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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