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Last Updated: Sunday, 18 March 2007, 11:31 GMT
Budget critic
On Sunday Sunday 18 March, Andrew Marr interviewed Shadow Chancellor George Osborne MP

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

George Osborne
Shadow Chancellor George Osborne MP

ANDREW MARR: And so to one of those Conservative voices, the Shadow Chancellor.

The man whose job it is this week to take on Gordon Brown in the Commons one last time.

The Tories are doing well in the polls and George Osborne can share some of the credit for that.

But their ideas on green taxes, as we heard earlier on, have gone down like a lead balloon, or an unleaded balloon I suppose I should say.

George Osborne, welcome.

Let's start with the overall picture, we've going to hear presumably from Gordon Brown looking back on the last ten years, a certain amount of justified self-congratulation when it comes to unemployment, when it comes to inflation, when it comes to the overall public finances.

GEORGE OSBORNE: Well I think you're right, we're going to have quite a lot of self-congratulation, that's never in short supply when the Chancellor's on his feet. I'm not sure it's justified. It is the case that for the last 15 years or so the whole world, the whole developed world has enjoyed a global low inflation, global low interest rates. I know Gordon Brown takes the credit for that, it's probably got much more to do with the Chinese workforce.

But the question we all face as a country is why didn't we use, make better use of that time to make our economy much more competitive, create that lower and simpler tax system I think we're going to need to compete in the future, reform our public services and our welfare system which of course were right there in the '97 Labour manifesto. You know, none of those things have really been achieved ten years on.

And if all Gordon Brown can do is claim credit for the global macro-economy, as I say there are other people and other factors that have been at work there.

ANDREW MARR: But there is an issue for you in all of this. As we read in the papers that this budget is going to raise the overall tax burden to record levels, as a lot of ordinary people feel heavily taxed, comparatively, people turn to you to say that you're going to cut their taxes. And yet you can't or won't say that.

GEORGE OSBORNE: Well we do have the highest tax burden in our history, at the end of Gordon Brown's chancellorship. Unfortunately we also have the biggest structural budget deficit - we're borrowing more than anyone - in the whole of the western Europe, more than Italy this year. So unfortunately the public finances do not sustain an immediate cut, or significant cut in taxation.

That is a tragedy, but it's a fact of life. And what people really want to know from us is that we're going to be serious credible people who can manage the public finances, that economic stability come first, ahead of tax cuts for example, and indeed ahead of rash promises on public spending, that we can be trusted with people's mortgages.

And that is the most important thing that I've had to establish in the two years that I've been doing this job, and indeed if you look at some of the polls and of course polls do come and go, but nevertheless one of the striking polls in the Sunday Times today shows that we are 7% ahead of Labour on the issue of economic competence.

When I started this job two years ago we were 22 points behind, so we have made progress, still a hell of a long way to go, but I think establishing that credibility on the economy is absolutely crucial.

ANDREW MARR: Well since you mention the polls, let's talk about the polls on green taxes which show thumping majorities against almost everything your commission has suggested. So let's go through them. I mean, are you yourself committed to making flying more expensive?

GEORGE OSBORNE: I think taxation on aviation does need to go up because we need to curb the growth in emissions from aviation. You know, politicians come on this programme, myself included, week in, week out, and say we need to tackle climate change, this is a very serious issue and so on. One of the biggest contributors, growing contributors to carbon emission is aviation.

And by 2050 by the time our grandchildren turn round and say "what did you do Andrew and George" we will see that aviation emissions will have contributed a quarter of all of the UK's carbon emissions. It's a hugely rising source of carbon emissions, we do need to curb the growth of aviation emissions. Anyone who's serious about climate change I think should accept that.

ANDREW MARR: And you will do that through the tax system, and people will pay more to fly?

GEORGE OSBORNE: Well there are various mechanisms, for example the European carbon trading scheme is going to include aviation.

But I think tax also has a role and that's why we've set out a number of options, one of them for example, one of the options is for example a flight tax instead of a passenger tax which is what we currently have. At the moment you might remember from last weekend, I think you had it on this programme in the paper review, there were empty planes landing at Heathrow.

They pay no tax at all at the moment. But the full Easyjet flight to Malaga pays the top whack of tax. That can't be right when they're both making the same contribution to carbon emissions and to climate change.

ANDREW MARR: It does sound a bit bonkers. But what about the idea of...

GEORGE OSBORNE: ...that's what I'm trying to change.

ANDREW MARR: ...but what about the idea, which some people also feel sounds a bit bonkers, of limiting every person to one short-haul flight holiday a year, because that's caused a lot of comment and a lot of anger.

GEORGE OSBORNE: Well, look, we're not limiting people to one short-haul flight a year. One of the options...

ANDREW MARR: Tax them to oblivion if they take a second one.

GEORGE OSBORNE: Nor are we going to tax them to oblivion. What we're suggesting, which is one the options alongside the flight tax, is that people pay a higher rate the more flights they use a year.

Despite what Andrew was saying, and I like Andrew Pierce as a journalist, earlier, it is not the case that most people in this country regularly fly many times a year. In fact half the population haven't flown at all in the last 12 months. So it is already a relatively progressive area of taxation. And, what we're saying is that one of the options is that if you take a number of flights a year you pay at a higher rate.

All I'm saying is that aviation should make its contribution to tackling climate change. And the most important thing, Andrew, which by the way in the polls that you've just mentioned, was not put to the public, was that every pound we raise from additional green taxes we will use to cut other taxes elsewhere. But it will be a balanced package. This will not be an overall increase in tax. Now I understand...

ANDREW MARR: This is what people don't believe do they?

GEORGE OSBORNE: Of course I'm, you know, after ten years of stealth taxes I understand that we are, there's a healthy degree of public scepticism about politicians who say this. So, all I would say is that we are going to set out the tax reducing part of the package later, then people will have a balanced programme and of course, come the General Election, they will be able to look at the balanced programme and make a judgement about whether it's credible, whether they trust us on the economy, whether they think we can deliver.

ANDREW MARR: But you could look the public in the eye and say, if we make it more expensive for you to process your litter, or drive your car, or go on a flight abroad, I absolutely promise that that money will go back in tax cuts elsewhere?

GEORGE OSBORNE: I can absolutely promise that money will go back in tax cuts elsewhere. What we're talking about is a shift of taxation from income onto pollution. By the way, this has been done before by Conservative governments, Margaret Thatcher's government shifted taxation from income onto consumption. I want to see it shifted onto pollution, I want you to pay as you burn rather than pay as you earn.

ANDREW MARR: Sure. Let's talk about one other controversial proposal which is to hand married couples a transferable allowance.


ANDREW MARR: So that they can move between sort of giving a fairly substantial amount of help to married people. First of all, is this a serious proposal? And secondly, if it is, is it only for people who are actually married, or is it for long-term couples who may have children? Is it for gay couples? Who is it for?

GEORGE OSBORNE: Well, you know, the commitment is to recognise marriage in the tax system reward to marriage in the tax system, also civil partnerships between homosexual couples, which of course we support as well.

ANDREW MARR: But not a sort of stable couple who may have been together for 20 years but never actually got married?

GEORGE OSBORNE: I mean, if I can draw a parallel with what we've just been talking about. We are prepared to take tough and difficult decisions on climate change and aviation. We're also prepared to say tough and difficult things about family breakdown and social breakdown.

And it is the case that marriage for all the... you know, I know of course we all know people whose marriages haven't worked, and so on. But it is genuinely the case that marriage is the best institution in which children should be brought up. It is the case that for example cohabiting couples, half of those relationships break down by the time the child reaches the age of five, whereas only one in twelve marriages break down by the time a child reaches five.

So we are saying something difficult, which is that marriage is a good thing and that at the moment the tax and benefit system actually discriminates against marriage. That's not right in our view, and that there should be a recognition of the value of marriage and civil partnership in the tax system.

ANDREW MARR: And we're talking about married people who have children? Or just, you get this if you get married?

GEORGE OSBORNE: Well we will set out the details of that, that is one of the options we are looking at, one of the discussions we're having, this is a serious programme of work we're doing as people will have seen with our aviation tax document, there's a serious amount of thinking going on here.

We are doing a great deal of thinking about how exactly that recognition of marriage, that support for marriage and civil partnership, should work in the tax system. When we've decided that I will come and sit here and explain it to you Andrew.

ANDREW MARR: And you'd be very welcome. But for the time being you're happy to say to people who've been in stable relationships for 20 years but don't happen to have the bit of paper, or, people who are honourably and reasonably in the condition of being single parents, as Conservatives we will discriminate against you?

GEORGE OSBORNE: Well, listen, I know there are single parents who come into my constituency surgery who do an absolutely heroic job, and I think we should be doing much more to pursue normally the absent father, and get them involved to bring up their children.

But we're saying a difficult thing which is that marriage is a valuable institution, should be supported. Aviation makes a contribution to climate change, we need to do something about that. Tough decisions, long-term decisions, I think we now look like the alternative government.

ANDREW MARR: George Osborne, thank you very much indeed.


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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