'I wish it had been different'

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

Business Secretary Peter Mandelson reflects on the 'wasted' years of tension with Gordon Brown; and he admits 'the economy is going to contract'.

SOPHIE RAWORTH: Now the political battle over how to handle the economic crisis is certainly hotting up.

Today the Chancellor, Alistair Darling, has signalled that he is willing to borrow to fund big public spending projects which will create jobs. And the Conservatives say struggling, small firms should be given a holiday from paying their VAT bills.

Now Peter Mandelson, Lord Mandelson, has been listening to our last guests and he joins me. First of all, I should say welcome back.

Lord Mandelson, Business Secretary

PETER MANDELSON: It's nice to be back.

SOPHIE RAWORTH: It's nice to be back. A surprise for all of us. You...

PETER MANDELSON: Not least for me.

SOPHIE RAWORTH: Not least for you. I can imagine. You are back in the cabinet a third time, Business Secretary.

You are going to be right in the thick of it over the next few years. What can you do to protect business?

PETER MANDELSON: Well the public - families, businesses right across the country - are understandably very worried, very concerned about what's happened with the banks and what's happening in the economy and the government's job is to recognise that and to respond to it. And we will.

We will get the country through this period in every way we can. We will stabilise and bring the economy back to health. We will also limit the short-term damage to the economy that would do us greater harm in the long-term if we take the wrong polic... make the wrong policy moves in our response to the crisis. So you've already seen the government take the emergency measures to recapitalise the banks.

That's absolutely essential: the banks are the foundation of our economy, of our housing market. Secondly, you've had the Chancellor today recognising that the government's actions mustn't contribute to the slowdown. I mean we have to recognise that the costs of doing nothing, as it were - of allowing the economy to slow down or costs of unemployment to rise - will be...

SOPHIE RAWORTH: He's effectively said... He's effectively said we're going to spend our way out of the recession.

PETER MANDELSON: Well those costs of doing too little will be greater than if we take the action to maintain spending and investment in the real economy and the public services.

SOPHIE RAWORTH: We're going to have to pay for it later on though, aren't we?

PETER MANDELSON: ... and in infrastructure too. But what I also want to do is make my contribution to ensuring that the country is in a position to benefit from the upturn and benefit from the you know dramatic growth of the global economy, which will continue.

Now the economy around the world is going to double in size in the coming decades. Our job in Britain is to make sure we get our fair share of that growth and I think we're well positioned to do so.

SOPHIE RAWORTH: But the Chancellor is making it very clear that we are going to spend, spend, spend now, isn't he? I mean we are going to go into enormous debt.

PETER MANDELSON: I don't, wouldn't characterise what the Chancellor has said in that way.

SOPHIE RAWORTH: Why not?

PETER MANDELSON: What he... Well for these reasons. One of the things that we benefit from in Britain is having over the last 10 years paid back a great deal of our debt. That means we are in a better position than other countries in Europe to borrow and spend more at a time of need as we're facing now. We've also benefited incidentally, historically, over the last 10 years from low interest rates and a sound macroeconomic management of the economy; we've seen productivity rise; we've seen investment in skills and innovation in our science base.

Now is the time to use and take advantage of all that we've done in the past in order to get our economy through the worst, but also, as importantly, make sure we're in a position to benefit from the upturn. And I know as European Trade Commissioner over the last 4 years, I've seen British companies around the world. They are very good, efficient, productive manufacturers. They are very well-placed in global market. The large, fast growing markets in China, in India, in Latin America and Russia, elsewhere, we are well placed.

SOPHIE RAWORTH: We're going to have to be.

PETER MANDELSON: But what we've got to do, what we've got to do is get the government, the public sector working hand in hand with the private sector and the business community to make sure that everything that we need to do at this stage is done both to get us through it and benefit in the future.

SOPHIE RAWORTH: We're going to have to be very well placed. I mean you just heard Sir Brian Pitman saying we're effectively going into a recession. We are, aren't we?

PETER MANDELSON: I agree by the... I agree by the way with Brian Pitman's broad analysis. Look, you know we must not talk down the economy, we must not talk ourselves into economic depression. I'm not saying that you know we should downplay this...

SOPHIE RAWORTH: But I'm not talking Depression. I'm talking recession and we are going into one, aren't we?

PETER MANDELSON: I'm not saying that we should downplay the risks. Of course there are risks for our economy, of course the economy is going to contract. That is, that is unavoidable.

SOPHIE RAWORTH: So a recession? I mean that is where we're heading.

PETER MANDELSON: No, I'm not going to use that word because I can't...

SOPHIE RAWORTH: Why not?

PETER MANDELSON: Because I can't foretell the size of the contraction that is going to occur. One thing I do know though is this.

There are going to be many firms, many small and medium sized enterprises in the country which are going to get into financial difficulties and they may even lose their businesses. There will be other enterprises for whom there are really strong long-term growth prospects who nonetheless are also going to experience short-term difficulties in cash flow and access to finance.

That's where I'm going to concentrate my attention and already the government has made clear that in our payment to small and medium sized enterprises, we're going to set ourselves the target of a ten day payment and I want to see others in the public sector and others in the private sector doing the same.

We're also going to talk to the banks. I've discussed this with the Chancellor on Friday - how the banks are performing and what attitude they're developing towards maintaining essential access to finance for small and medium sized businesses during this contraction. So there's a lot...

SOPHIE RAWORTH: But I mean this is all...

PETER MANDELSON: ... there's a lot that we can do and government...

SOPHIE RAWORTH: In the future?

PETER MANDELSON: No, now! I will...

SOPHIE RAWORTH: That will make a difference to small businesses who right now...

PETER MANDELSON: I mean now. Yes because...

SOPHIE RAWORTH: ... feel like they're going to the wall?

PETER MANDELSON: Yes because the main problems they have are cash flow and access to finance.

SOPHIE RAWORTH: But they can't get credit from the banks, can they? They cannot get loans from the banks. They're not lending to each other, let alone the businesses.

PETER MANDELSON: I met a roomful of representatives of SME's, small and medium sized enterprises on Thursday. Sat down and discussed with them the experiences and I gathered all the anecdotal evidence of what's happening in the ground, on the ground.

One of the things that concerned me, I must say, is that banks are not only suddenly and unilaterally changing the loan arrangements and conditions on which they're making finance available, but they're also charging the firms you know higher administrative costs for making those changes...

SOPHIE RAWORTH: Absolutely.

PETER MANDELSON: ... in their loan conditions. Now I don't think that is good enough.

SOPHIE RAWORTH: So what are you going to do then? How can you force the banks to lend to companies, lend to small businesses and do it at reasonable rates because these banks need short-term loans now?

PETER MANDELSON: Amongst those banks in whom the government is taking a stake, we have a commitment to broadly maintain the availability of finance both for the housing markets and SME's that was being provided in 2007 and we're going to discuss with them how that is going to be transacted.

SOPHIE RAWORTH: So these are the banks that the government has a stake in, so they are going to be forced to give loans to small businesses?

PETER MANDELSON: We have made clear what we expect and what the condition is for our investment in those banks.

Amongst those banks in which we do not have a stake, Alistair Darling and I are going to talk to their chief executives and discuss with them how they can use their discretion and use, take a rather more flexible approach during this time of hardship in order to maintain credit lines to small and medium sized enterprises.

So please, please don't alarm people unnecessarily. Yes, they are difficult times and it is going to be a struggle, but there are things that we can and will do both directly as a government but also indirectly using the banks as lenders to businesses as well.

SOPHIE RAWORTH: It must be very difficult for a lot of small businesses to see the banks being bailed out and yet some of these, a lot of them are going to the wall, feel like they're going to the wall. The banks bailed out with taxpayers' money and no penalty!

PETER MANDELSON: Yes, but we've got to minimise the number of businesses that go to the wall during this period. Let me give you another example. The European Investment Bank is increasing its loan facilities for UK lenders, bankers to make greater sums available for small businesses in Britain.

Our job as a government is to work with the banks to make sure they maximise what they're drawing from the European Investment Bank in order to increase their own loan facilities.

There are a whole variety of different things. I for example last week said that I hoped that the tax authorities would approach their relationship with small firms where they can, using their discretion, using their flexibility in order to help get businesses through this difficult period. I'm not saying...

SOPHIE RAWORTH: Le?

PETER MANDELSON: Let me finish this point. I'm not saying that the government can act directly to save every business. I'm not saying that we can give orders to banks or command that the tax authorities take this action or that in relation to particular enterprises.

But we can put in place - and we are - a framework of policy which in the round can help small and medium sized enterprises as well as other businesses get through this period in anticipation...

SOPHIE RAWORTH: Cutting immigration? That's a way of doing it.

PETER MANDELSON: ... in anticipation for the upturn.

SOPHIE RAWORTH: Cutting the number of people come into this country. That's going to help, is it, with unemployment rising?

PETER MANDELSON: Well cutting immigration is not actually going to help firms get greater access to finances...

SOPHIE RAWORTH: No, obviously talking about British people getting jobs.

PETER MANDELSON: ... it's not going to increase their tax flow. What we need... Their cash flow. What we need to do in immigration, frankly, is match the qualifications and suitability of those who want to come to this country with the needs of our country.

The government has a points based system of doing that. It's worked well and we need to continue it.

SOPHIE RAWORTH: Okay. Now you said you were extremely surprised to be back here, obviously. A very bold move by Gordon Brown. A risky one, do you think?

PETER MANDELSON: I don't think so because I have experience that I've gained from four years as Trade Commissioner. I know rather more about the world than I did when I was simply operating in British politics.

I hope I can bring that knowledge. I hope I can bring those networks to help promote investment in Britain to help bring capital and skills and...

SOPHIE RAWORTH: And what about personal relations?

PETER MANDELSON: ... innovation to this country.

SOPHIE RAWORTH: I mean you've said you're ?joined at the hip?. You said you've both ?joined at the hip?. I mean people find that very difficult to believe.

PETER MANDELSON: They find it hard to believe because they've spent the last sort of 10, 15 years reading stories in the newspapers about how much we you know don't get on.

SOPHIE RAWORTH: And you didn't get on. Come on!

PETER MANDELSON: It's not been a perfect relationship, it has had its rocky moments.

SOPHIE RAWORTH: Very rocky moments.

PETER MANDELSON: And you know I think both of us, looking back, would say we wasted a lot of the energy and time that we could otherwise have devoted to the success of the government by not repairing our relationship sooner.

But it has been repaired and I think that you know for me, gosh when I look back 10, 15 years and the breach that was opened up you know when there was that original disagreement about should Tony go forward, should Gordon go forward or whatever, I wish we could have avoided that. I wish it could have been different. I wish we could all have been pulling together like one family and making sure that we were acting you know as one, as one band in the party.

SOPHIE RAWORTH: So you've shored up the Prime Minister. Your return has shored up the Prime Minister. Does it mean that...

PETER MANDELSON: But there is the chance to do so and leave the past behind us and that's what I'm going to do.

SOPHIE RAWORTH: So your return has shored up the Prime Minister hasn't it? Does it mean now that he will definitely lead the Labour Party into the next election?

PETER MANDELSON: I have absolutely no expectation that anyone else than Gordon Brown will lead the party into the next election. And judging by the openness that the public has to Gordon Brown now - a renewed openness, they're I think looking at him afresh and saying well you know he is decisive, he is capable of bold measures, he does know where to lead the country. He's not a showy person, he's not an attention seeking person.

You know he's not swinging around like a pendulum in the way that David Cameron is - you know one minute all over the bankers as his best friends and then you know you can't see him for dust once they become unpopular; one minute saying the Prime Minister's doing very well; the next minute saying he's deeply flawed and to blame for everything that's going wrong. This is not Gordon Brown's style. He is steady, he is focused, he is not showy and I think he will lead the country...

SOPHIE RAWORTH: Now I'm afraid...

PETER MANDELSON: ... through this period and onto the upside when we get through it.

SOPHIE RAWORTH: Talking of showy, Russian billionaires - Oleg Deripaska. How well do you know him? How much have you socialised with him?

PETER MANDELSON: The thing I want to say about these sort of muck raking stories that have appeared in some of the Conservative newspapers in the last week, doing the Conservatives' job for them, is that I have a very clear view of my public role and the responsibilities I have in that public role and how I spend my private time.

There has been innuendo in the newspapers that I gave favours or I gave benefits as Trade Commissioner to individuals because of my personal friendship with them. The entirety of the European Commission, the Director General for Trade himself has made clear that there is not one jot of truth in that; that it is 100% false and that's where I'm going to leave it and I'm not going to say anything more about it.

SOPHIE RAWORTH: Absolutely and I... No, no, all I want ask you is is it a lack of judgement then? Nobody is actually saying you have done something wrong. The Commission's most senior trade official, David O'Sullivan, says you have done nothing wrong. (Mandelson laughs)

What people are questioning is whether it is a perceived lack of judgement or a perceived conflict of interest to be seen aboard a yacht of a Russian billionaire.

PETER MANDELSON: But you're doing, you're doing exactly the same...

SOPHIE RAWORTH: I'm not, I'm asking about lack of judgement.

PETER MANDELSON: ... you're doing exactly the same as the Tories are doing...

SOPHIE RAWORTH: I'm not at all. I'm asking about lack of judgement.

PETER MANDELSON: ... and the papers. Well let me answer then.

SOPHIE RAWORTH: Go on then.

PETER MANDELSON: You're doing exactly the same as the Tories and the Tory supporting newspapers are doing. You're creating a whole lot of smoke, a whole lot of innuendo in order to try...

SOPHIE RAWORTH: I've said... Nobody's said you've done anything wrong. I'm making that very clear.

PETER MANDELSON: Well thank you very much. You've said I've done nothing wrong. Therefore what do I have to answer for?

SOPHIE RAWORTH: A lack of judgement. Appearing, socialising with somebody who could benefit from you and your position as European Trade Commissioner.

PETER MANDELSON: Sophie, Sophie, you cannot do business as a European Trade Commissioner in Russia, India, China, South Africa, Brazil, all the big emerging economies of the world without having contact with the big business and economic figures in those countries as well as the political figures.

I make a very clear distinction indeed. I do not allow any conflict of interest to arise between the contacts I have with these individuals and how I do my day job. I've now come back to British politics, I'm now a British minister, I'm governed by the ministerial code. I've signed up to the ministerial code and I will abide by the ministerial code...

SOPHIE RAWORTH: Which says avoid all perceived conflicts of interest...

PETER MANDELSON: ... and if you have, if you have any evidence, any evidence, please bring it to me, but don't try to smear me with innuendo.

SOPHIE RAWORTH: I'm not trying to smear you and I have said you have done nothing wrong. I have made that very clear. Let me just...

PETER MANDELSON: Thank you very much.

SOPHIE RAWORTH: Let me just ask you finally about your title that you've chosen. I mean you've come back as the Baron of Hartlepool and Foy.

PETER MANDELSON: No, I haven't. I've come back as Lord Mandelson.

SOPHIE RAWORTH: Lord Mandelson. The man. And a welcome return?

PETER MANDELSON: If you welcome me, I'm very glad to be here.

SOPHIE RAWORTH: Okay. Lord Mandelson, thank you very much.

PETER MANDELSON: Thank you.

INTERVIEW ENDS

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

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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