Cameron 'dancing to his own tune'

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

The Business Secretary says the Tories are out of step on the economy with their 'no action plan'.

ANDREW MARR: Now then I'm joined by the Business Secretary, Peter Mandelson. Lord Mandelson...

PETER MANDELSON: Good morning.

ANDREW MARR: ...good morning and welcome.

Now you know the details of what's coming tomorrow. We don't, but we've read quite a lot this morning.

Is this kind of scale of fiscal stimulus really sustainable? Can we pay for it as a country?

PETER MANDELSON: Yes we can, but we've got to organise how we're going to do that and we've got to explain how we're going to do that. I mean one of the things that David Cameron has seized on, apart from saying that we're going to have to borrow more - well of course we are, everyone round the world is going to have to borrow more in order to get through this economic crisis - but he's also said that the public finances will need changing again in the future.

Well of course they will, if what we're going to do tomorrow is going to be sustainable. So we do have a plan of action as opposed to the Conservatives' no action plan. We're going to do this because we know that if we're going to get through this, as we are, to stop this very serious downturn turning into a very deep recession, we've got to enable and help viable businesses survive, and that's what tomorrow's package is going to be all about.

ANDREW MARR: But can you understand when people perhaps hear that they're going to get a tax giveaway, many people - already heavily over borrowed on their own credit cards and banks and are perfectly aware, as you've acknowledged, that there are going to be tax rises coming in due course - don't spend that money; actually they use it to pay off debt and therefore don't help and don't do what ministers want them to do?

PETER MANDELSON: Well let's just wait and see what the Chancellor's going to announce tomorrow...

ANDREW MARR: Sure.

PETER MANDELSON: ...and I can't pre-announce what he's going to do.

ANDREW MARR: I'm talking about the psychology really.

PETER MANDELSON: But one thing, one thing I do know is that you cannot rely on one initiative, one idea or one policy instrument alone. That's why what the Government has done in restabilising the banks and getting the banks behaving like ordinary mainstream banks again - as they need to do and will do in due course as their confidence and trust rises, and the sooner the better - helping businesses through helping their cash flow as the Government has done and introducing a prompt payment limit of ten days payment for all the government's bills, but also delivering the sort of stimulus to the economy that will raise consumers' confidence, that will encourage them to spend, put more money in their hands, therefore raising demand and filling up order books again. Now if we don't do that �

ANDREW MARR: Maybe. We don't know how they're going to behave is my point.

PETER MANDELSON: We don't, but that's not a reason for inaction.

ANDREW MARR: Alright.

PETER MANDELSON: That's not a reason for sitting back and simply watching people being put out onto the street from their jobs �

ANDREW MARR: Sure.

PETER MANDELSON: ...or losing their houses.

ANDREW MARR: Sure. Well that's...

PETER MANDELSON: You know that is not what the Government is there to do.

ANDREW MARR: Okay.

PETER MANDELSON: And the important point about this, Andrew, is that only government can take this sort of action.

ANDREW MARR: Well oppositions by definition can't obviously, but let's...

PETER MANDELSON: Well in the case of our opposition - they're saying that if they were the Government, they wouldn't do it either.

ANDREW MARR: Well we'll wait and see. Let's talk about the banks because you raised the banks. Vince Cable was making the point that there should be a government representative on the boards of the banks. It's been very interesting that the bank to take the first decisive action to promise their business borrowers a bit more has been R...

PETER MANDELSON: I welcome what the RBS have announced today.

ANDREW MARR: Well the RBS of course are the bank who have the biggest government involvement at the moment of the big ones.

PETER MANDELSON: So I hope our policies are therefore working by recapitalising...

ANDREW MARR: What do you think?

PETER MANDELSON: ...the banks and encouraging the RBS to take this initiative, and I hope other banks will follow.

ANDREW MARR: Do you think you need to go further with the other banks? Do you think that you should have representatives on the boards of the other banks and do you think that eventually we might have bank nationalisation?

PETER MANDELSON: Well where the Government is invested in the banks and taken a holding, that shareholding will be managed by a new body - the United Kingdom Financial Institutions Instruments - and we will be able to hold the banks to account to live up to the conditions and the commitments that they have taken on as a quid pro quo for the Government's investment. But I have to say to you what's more important, much more important than putting people on the boards is changing the behaviour of the managers of the banks - not just at the national level, but at area level and local level.

ANDREW MARR: So how do you do that?

PETER MANDELSON: Well the stories I'm hearing, I must say are alarming. I know the banks say that they're not representative and that actually bank lending is being maintained, but you know if it is the case that banks locally are unilaterally rearranging overdraft and lending facilities, sending this information out by email without even a face-to-face meeting with those who are taking on the loans, ordering those they're lending to to comply with their requirements within 48 hours, that is not the sort of constructive relationship that is sustainable between banks and businesses.

ANDREW MARR: If it's alarming, what can you do about it?

PETER MANDELSON: I've already done it: I've bought the banks together with the small business representatives and we're going to do the following. First of all, we're going to have an agreed statement of principle, a code of behaviour that's going to govern banks' behaviour towards businesses. Secondly, I've set up a monitoring panel that is going to gather data about the banks lending from around the country so that we know exactly what is going on...

ANDREW MARR: Okay.

PETER MANDELSON: ...and then we're going to have continued meetings - as many as necessary, I might say - between the Government, the banks and the small businesses to make sure that that code of behaviour is properly adhered to by the banks.

ANDREW MARR: Any stick? Would you take bigger holdings? Would you threaten them with nationalisation?

PETER MANDELSON: I don't think... I don't think we need to take bigger holdings.

ANDREW MARR: Okay.

PETER MANDELSON: What we do need to though see is the banks responding to what is being done to help them out in the situation.

ANDREW MARR: And if they don't?

PETER MANDELSON: And I want a constructive relationship with them, of course, but they have to know that they are going to be tested and judged by what they do and what role they play to help Britain and British business getting through this economic storm.

ANDREW MARR: Tax rises coming when, do you think?

PETER MANDELSON: In the medium term, the Chancellor has said - and he's absolutely right to say this and he'll do so again tomorrow - that we have to get our public finances onto a sustainable basis. He has to explain how he's going to do that and he will.

ANDREW MARR: With a timetable?

PETER MANDELSON: That is, that is what the CBI and other business leaders have asked for. They've asked for a fiscal stimulus tomorrow that kicks in quickly, that's temporary and that is sustainable over the medium term. That's what you're going to get from the Government tomorrow.

ANDREW MARR: And no election next year?

PETER MANDELSON: Not that I've heard of. But if you've heard of differently, you may have more information than I do.

ANDREW MARR: It must be, it must be possible?

PETER MANDELSON: At the moment, at the moment the entire government is focused on getting us through this economic storm and this blizzard and I'm confident that we will.

ANDREW MARR: Lord Mandelson, thank you very much indeed.

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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