Page last updated at 12:48 GMT, Sunday, 31 January 2010

George Osborne MP transcript

On Sunday 31 January Sophie Raworth interviewed Shadow Chancellor, George Osborne MP.

Please note 'The Andrew Marr Show' must be credited if any part of this transcript is used.

SOPHIE RAWORTH:

Now the people who used to be regarded as the masters of the universe, the movers and shakers of the financial world, have been meeting in Davos in Switzerland this week to talk about rebuilding the world economy after the crises of the last two years. While some countries, such as the United States, are beginning to grow quite healthily, here in the UK the green shoots look very fragile indeed. Well George Osborne hopes to be nurturing them after the election, and he's with me now. Good morning. The Prime Minister has said this morning in his podcast that the weak growth figures show that they're right, that the rug should not be pulled from beneath our feet with sort of spending cuts immediately, and that's the way to nurture the economy.

GEORGE OSBORNE:

The first point I'd make is that Gordon Brown promised to take us through the recession, and we had the longest recession and we were the last out of any major economy. Then he promised us a strong recovery, and we got the weakest recovery in the G20. So every prediction he's made about the economy has turned out to be wrong. Now he says we don't have to deal with the debts. We can wait until 2011. Well the rest of the world is starting to front up to these debt problems and Britain, with the largest debts, the largest borrowing of any major economy in the world, has to deal with this problem. If we don't, we risk a Greek style budget crisis that will put interest rates up and people watching this programme will see their mortgages go up, they'll see businesses go bust, and we will be back in recession.

SOPHIE RAWORTH:

Right, and you've said that you will tackle it further and faster than the government is doing. But this week, David Cameron has actually said "early action to cut the deficit does not need to be extensive." What does he mean?

GEORGE OSBORNE:

Well he is saying, and I say it with him, that we need to make a start. We need to show the world that we can deal with this largest budget deficit. We've got to show early action to get credibility with the international community and with domestic businesses that wonder whether the government has the appetite to face up to the very difficult problems that Britain has. And that means that a credible plan to deal with Britain's budget deficit, so we can keep interest rates lower for longer. That's the absolute key part of having a stronger recovery. Because we have to answer this question: where is the growth going to come from in the British economy? Why is the British economy so weak compared to the Americans, compared to the French, compared to the Germans?

SOPHIE RAWORTH:

(over) So the way you'll do it …

GEORGE OSBORNE:

(over) And one of the reasons is this albatross of debt, built up in the good years by this Labour government, that now hinders the recovery.

SOPHIE RAWORTH:

And the way you'd do it is, what, you don't go ahead with the government spending plans, 31 billion, and you take the axe to spending? Do you do that immediately if you get into power?

GEORGE OSBORNE:

Well if we win the election, of course we'll win it after the beginning of the financial year because the election's likely to be in May and the financial year begins in April.

SOPHIE RAWORTH:

So how much can you turn around?

GEORGE OSBORNE:

So you can make some in year budget cuts, and with the Swedish Finance Minister in January I explained what some of those were. For example, we can move quickly on the advertising budget, the big government consultancy budget. There are child trust funds which go to richer people in this country …

SOPHIE RAWORTH:

(over) These are small cuts though really, aren't they?

GEORGE OSBORNE:

Well there is a limit to what you can do in year, and that's what David and I have been talking about, but you've got to make a start. And the key thing is - and I said it in my party conference speech last autumn, so I'm not sure why everyone thinks it's a great revelation today - the pace has to be determined in conjunction with the Bank of England because this is about trying to keep interest rates lower for longer.

SOPHIE RAWORTH:

But I don't quite see what the difference is between what … I mean Alistair Darling is obviously saying that he will halve the deficit over four years, starting the year after. You're talking really, by the sounds of it, at tinkering at the edges. You're not talking about great departmental cuts as soon as you get into power, if you do.

GEORGE OSBORNE:

Well, first of all, I'm not sure that Alistair Darling and Gordon Brown are saying anything like the same thing, so I'm not sure what the government plan is. But in as much as they have a plan, it is one that currently does not command international confidence. The credit rating agencies, the international credit rating agencies are questioning whether Britain can pay its way in the world, and deciding not to do anything until 2011, which is Alistair Darling's position, I think is a mistake. And I think if you look at what other countries in the world are having to do at the moment in order to try and retain confidence, we have to learn from that and we in Britain have to get some confidence back into the British economy.

SOPHIE RAWORTH:

We're only just out of recession though, and for all you know … I mean we're going to have to wait till the next set of figures because it could be, come end of April when the next set of figures come out, we could be back in recession; we could be looking at a double dip. Then what do you do? Do you still take the axe to spending?

GEORGE OSBORNE:

Well, look, I think the … You keep saying "take an axe to spending." I'm saying make an early start. Do it in conjunction with the Bank of England.

SOPHIE RAWORTH:

(over) So there is a slight softening though in tone, isn't there?

GEORGE OSBORNE:

I have said all along …

SOPHIE RAWORTH:

You've talked about putting the brakes on though, haven't you?

GEORGE OSBORNE:

I said all along … I said in my party conference speech - in other words the speech where every single sentence is analysed - that you have to do this in conjunction with the Bank of England; that the pace of fiscal tightening has to be done in conjunction with monetary policy in order to keep interest rates lower for longer. But we've got to get confidence back into the British economy, and the weak recovery is itself a lesson to us all that we cannot go on with the Gordon Brown model of growth, which is government debt, consumer debt, banking debt. That is what delivered this enormous crisis for Britain. That is why the British recovery is so weak, and we need a new British economic model that finds new sources of growth - exports, business investment, the private sector starting to create jobs instead of just having jobs in the public sector being created. That's what we need.

SOPHIE RAWORTH:

Yes because we're very overly dependent on financial services, we're a consumer society living on debt. I mean where do we start this growth?

GEORGE OSBORNE:

Well that is the big question: where is the growth going to come from? And I think we need to, as I say, expand business investment, get businesses growing, create private sector jobs, and as a government help people do that. And let me give you an example. We should be aiming to be the country in Europe with the best super-fast Broadband - the world leaders in super-fast Broad...

SOPHIE RAWORTH:

(over) I thought we already are. The government's planning to do that.

GEORGE OSBORNE:

You know, you look at countries like South Korea, Singapore - they are way ahead of us, and they seizing this new technology. So the next Conservative government is going to aim to have a 100 megabit Broadband to a majority of the population by 2017. In the 19th century we built the railways; in the 20th century we built the motorways. In the 21st century, let's build the super-fast Broadband network. That will create hundreds of thousand of jobs for Britain. And at the moment we borrow money from the Chinese in order to buy the things that the Chinese make for us. Let's start selling to the Chinese and the Indians. Let's have our web services, our Internet services, our Internet shopping, the leading services in the world. Let's be selling to a world of consumers instead of buying from them.

SOPHIE RAWORTH:

But the government's already announced the same thing. They are going to do super-fast Broadband. They want it in something like 90% of the homes by I think 2017. So it's the same thing, but how will you fund it? You will fund it differently, presumably?

GEORGE OSBORNE:

(over) Well first of all they have a woefully poor ambition. They want the whole of the country to have 2 megabits. I mean South Korea is going for a 1 gigabit Broadband. We're talking about 100 megabits, which is a big step forward for this country. It means you can have interactive teaching over the Internet at home; you can have telemedicine; BBC iPlayer would have an enormous future in this world. You know we must not be left behind by this, and at the moment we are being left behind by the Broadband revolution. And if there are some parts of the country where the market can't get to (because I think the best way to deliver this is by breaking up the British Telecom monopoly at the moment, which holds back companies like Carphone Warehouse or Virgin) if we find the market can't do that, then use the BBC licence fee, the digital switch over money in the BBC licence fee, to get Broadband out to the rest of the country. But let's see, first of all, if we can have the market delivering that super-fast Broadband to the country.

SOPHIE RAWORTH:

(over) Okay, let's just talk about Barack Obama and banks, and Barack Obama spoiling for a fight with the banks. Are you going to be doing the same?

GEORGE OSBORNE:

Well it's not a question of spoiling for the fight. It's about having a new model of finance. I mean again Britain had the most overblown banking system in the world. Joe Stiglitz, an American Nobel Prize winning economist, pointed his finger to the UK in this regard. And so I agree with President Obama that we need to stop our retail banks engaging in the riskiest end of investment banking, the large-scale proprietary trading. I agree we should have an international global banking levy; not the Tobin tax that Gordon Brown has been talking about. And you mentioned Davos. I was in Davos talking to Larry Summers, the President's Chief Economic Adviser, talking to the French Finance Minister and to the IMF. You know I think we can get some global agreement on this, but we have to move to a new model of banking and that is not what the current government is prepared to do because they're stuck with what they developed over the last ten years. They refuse to see anything wrong in their regulatory system or indeed in the system …

SOPHIE RAWORTH:

Okay …

GEORGE OSBORNE:

… of banking that led us into this mess.

SOPHIE RAWORTH:

But also, I mean bonuses is another big issue and part of all this, and would you then bring in some sort of legislation in order to curb bonuses?

GEORGE OSBORNE:

Well do you know I came on this programme when Andrew was interviewing me in the autumn, and I said the banks shouldn't pay large bonuses, that we should not allow retail banks to do large-scale proprietary trading. And some months later, I think the things I said there prove to be where the rest of the world is going as well.

SOPHIE RAWORTH:

Yes, but I'm not asking about just words. I'm asking about legislation. Would you actually make it law? Would you actually say that they had to curb bonuses?

GEORGE OSBORNE:

Well I'm saying that the law should require them to set aside large amounts of capital for their risky activities, to stop them doing the riskiest things like proprietary trading, that there should have been no cash bonuses paid this year, and we should have in the future an international banking levy to protect British taxpayers.

SOPHIE RAWORTH:

So no legislation then, no legislation?

GEORGE OSBORNE:

Well some of those things would require legislation. But it is a new model of finance because in the end the banking sector should be getting credit out to the small and medium sized businesses watching this programme that are part of the recovery, and instead of that … instead of paying the very large bonuses to the bankers, which I think are undeserved at the moment.

SOPHIE RAWORTH:

George Osborne, thank you very much.

INTERVIEW ENDS



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