The party's over

On Sunday 08 February Andrew Marr interviewed George Osborne MP, Shadow Chancellor

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

Shadow Chancellor says it's unacceptable for banks to pay bonuses to senior staff.

ANDREW MARR:

George Osborne MP, Shadow Chancellor

Now in the opinion polls, the Conservatives are again piling up leads that would see them in power with a comfortable overall majority in an election.

They've been attacked by Gordon Brown for being the "do nothing" party on the economy, and retort with a list of ideas about getting more credit to business and helping savers.

Is that going to be enough? George Osborne, the man who would be Chancellor, joins me now. Thank you.

Can I start with what's all the over the papers today, which is this huge row over bonuses.

Would you like to see the Government simply stopping these bonuses being paid?

GEORGE OSBORNE:

Well yes is the short answer - for senior management. Cash bonuses at a time like this for people who have been involved in the higher echelons of a bank is simply unacceptable. And the Government is the majority owner of one of these banks, owns about half of another - Lloyds - and I think the Government should have made it absolutely clear that in the current climate, when many other people - indeed people watching this programme - are taking pay reductions or indeed fear losing their job, that it is totally unacceptable for these large banks, which have large taxpayer shareholdings, to be paying large cash bonuses to their senior management.

ANDREW MARR:

I mean some of the banks are saying well we've got contractual obligations. Presumably there's not much the Government can do about that?

GEORGE OSBORNE:

Well I think first of all we should look at those contractual obligations because remember these banks wouldn't be in existence without taxpayer support, so you know it's extraordinary that the Government's not doing that. I think it's also extraordinary that we're in this situation because back in October it was clear - indeed Conservatives raised it at our Conservative Party Conference, for example - that the bonuses were going to be an issue in the New Year, and for the Government to wait until the last moment and then Alistair Darling sets up yet another review...

ANDREW MARR:

Well I was going to ask you about that.

GEORGE OSBORNE:

...which is not going to have an impact on this year's bonuses, as far as I can see, just speaks volumes of how the Government approaches the credit crunch and the whole recession, which is hand to mouth, chasing headlines, behind events; never actually trying to lead things, never trying to see what's coming over the hill and plan for the long-term.

ANDREW MARR:

And yet in many ways a proper review of how these banks are run is the right thing to do, isn't it?

GEORGE OSBORNE:

Well, there are several government reviews underway. I mean they've got Adair Turner reviewing supervision and how the financial system is regulated; they've got Wim Bischoff reviewing how financial services are going to operate in Britain; now they've got another review, which I suspect has been set up just to respond to this week's headlines about bonuses. You know, what people want from this Government is a bit of leadership, and instead of endless stream, an endless stream of short-term initiatives, things that are designed to catch the headlines of the Today programme that morning, actually some idea of where they are trying to lead the country and measures that not only work in the short-term but also work for the longer term and give this country some confidence that there is a brighter economic future ahead.

ANDREW MARR:

We're now in the situation where interest rates are as close to, damn it, to zero, where certainly in your view there is no further give on fiscal policy, there's no money left. So what do you think, given where we are now, should happen next? Are you in favour of actually the bank printing money to push into companies, to keep credit moving?

GEORGE OSBORNE:

Well this is so-called quantitative easing.

ANDREW MARR:

Yes, I was trying to avoid the phrase. (laughs)

GEORGE OSBORNE:

QE. It's already got an acronym. You know look, we're in a situation where the Government are running out of options and I've always said that quantitative easing, which would be an extraordinary step to take, is there as a last resort, but it is a last resort and the fact that we're thinking about it is an indication of how everything else the Government has tried has not worked. So I wouldn't rule it out if I was the Chancellor of the Exchequer. I would certainly clear up who's actually going to be in charge of quantitative easing before we get to that point - so, is it the Chancellor of the Exchequer, is it the Bank of England and the Monetary Policy Committee? But the fact that we're even having this discussion is an indication of how little the Government has achieved in the face of this recession. And of course what we hardly talk about now, but actually last time I was on this programme we were talking about a lot, is that VAT cut, which was supposed to be the big answer to the recession and now is attacked not just by the British retailers like Marks and Spencer and Next, but also of course the French President, the Dutch Finance Minister, the German Government - people are lining up to say...

ANDREW MARR:

Yes.

GEORGE OSBORNE:

...that the Chancellor of the Exchequer's response to this crisis - and Gordon Brown's response to this crisis - has been inadequate and is not one that other people are following.

ANDREW MARR:

Fair to say, I think, there are different views on the VAT cut, and they would no doubt say that it's too early to tell.

GEORGE OSBORNE:

Well, Andrew, they may... There are different views in this sense: Gordon Brown and Alistair Darling think it's a good idea and virtually everyone watching this programme thinks it's a bad idea.

ANDREW MARR:

No, that's not quite right. The IFS are on their side. But let me ask you about something else you just said there. You talked about the Bank of England. Do you think the Bank of England's done a good job in this?

GEORGE OSBORNE:

Well I think actually the Bank of England made mistakes during the last ten years. They didn't spot the build-up of levels of debt in the economy - although, to be fair, that responsibility was taken away from them. I think there's an argument that they didn't do enough to tackle the emerging asset boom - the big boom in housing, for example - and were too narrowly focused on inflation. I think the bankers made mistakes as well. I think also of course the Government made mistakes. I mean Alistair again, who's on this programme later, has got an article in today's papers saying the era of risk must be over. I mean who was in charge? Who was actually at the wheel of the ship over the last ten years? Gordon Brown. And for him now to come out and say it's the bankers' fault or indeed the Bank of England's fault - yes, they share some of the responsibility, but the Government must share its responsibility for its role in the age of irresponsibility.

ANDREW MARR:

So just returning to the Bank of England itself. I mean this is one of the last really opaque institutions in this country. Most people never see the people taking these decisions, know nothing about them, and they don't seem to be publicly accountable in any way. Do you think if you became Chancellor, one of the things you'd have to do is to look again at the constitution, the structure of the Bank of England, because you actually read out, as it were, quite a long charge sheet against them just now?

GEORGE OSBORNE:

Well I mean I have actually discussed this with the Governor of the Bank and I think there are things that could be done. I think appointments to the Monetary Policy Committee, which are very obscure and opaque, not done in the way that other appointments to public bodies are carried out, need to be made much more transparent. I would actually move the Governor onto a single fixed term, so you don't have this political row about his reappointment and give the Prime Minister of the day a chance to interfere in that. I think I would also give, I'm certain I would give the Bank of England greater powers than it already has. I mean I think the Bank of England needs to have a role in calling time on the overall levels of debt in the economy and that it can influence the way that credit cycles develop, booms in housing take place by, for example, saying to the FSA you've got to go to individual banks and tell them to hold more money in the good years. This is called Capital Adequacy rules. It's very technical, but it's very important. Basically Gordon Brown and Alan Greenspan had a view, which was you can't control asset price booms, you can't control the boom and bust in house prices and so on...

ANDREW MARR:

Yes.

GEORGE OSBORNE:

...and you can only clear up after the event. I think we've got to do more to try and manage that process than happened over the last ten years.

ANDREW MARR:

If you were Chancellor, would you do the kind of thing that Obama has done in the States and actually insist on a cap to payments where banks have failed and have been rescued by the Government?

GEORGE OSBORNE:

Well I... first of all, I certainly wouldn't rule it out at this stage. I mean if the banks are proceeding on the course that they apparently are proceeding on, then I think we should actively look at a cap. Of course there are...

ANDREW MARR:

Couldn't you just go a little bit further and say yes, given that you expect to be Chancellor soon?

GEORGE OSBORNE:

Well I think we need to look at what the banks are about to do, and you know at the moment I'm only reading the newspaper stories. I've had some conversations with them myself. I think it's there as an option for the Government to use and deploy if they need to. Certainly I think the Government would be unwise to rule it out.

ANDREW MARR:

Your leader, David Cameron, has now talked about a more moral capitalism. Everybody nodded at that and then said well what, if anything, does that mean? Can you enlighten us?

GEORGE OSBORNE:

Well I think it's understanding that markets are a means to an end, not an end in themselves, and sometimes in politics you're confronted with a choice. I mean let me give you a very good example: maternity rights. You know you can speak to plenty of small business people and indeed larger employers who say that maternity rights are difficult to administer and they can disrupt a company. On the other hand, you know we all as a society want happy parents, happy children, people to spend more time at home. There's a choice...

ANDREW MARR:

(over) It's a small example, if I may say so, given the awesome crisis facing...

GEORGE OSBORNE:

(over) No, no, I think it's a very good example of the kind of choices that policymakers face and governments face and society face, and I think on that example you know we are in favour of maternity rights, in favour of flexible working for parents. In other words, markets are not a be all and end all and the overall ambition of a society should not be to have the most efficient capitalist markets that exist. Markets as a tool...(Andrew Marr tries to interject) Well markets as a tool for distributing resources and rewards according to effect are of course far better than other systems we've had, but there is a role for government in making sure that the unfairnesses created by markets are addressed. And also...

ANDREW MARR:

So...

GEORGE OSBORNE:

...where there is a genuine tension - as there is on for example employment rights, that government has a role.

ANDREW MARR:

(over) So you'd want, what - less greed, more regulation?

GEORGE OSBORNE:

Well, I think it's a balance. I mean let's have another example: environmental regulation. It is in the interests of society that we put a price on carbon emissions and therefore government has a role in doing that - making sure that a market failure is corrected. This, you know this all takes place within a society that tries to address some of the long-term challenges we have of inequality, of a lack of aspiration, of the fact that people born today in less advantaged circumstances cannot go as far as they used to in the past in general. You know these are issues which society - not just the state - society should take an interest in.

ANDREW MARR:

I mean it does sound a much more sort of Centre Left position perhaps than Conservatives are used to. But let me just ask you about the bankers one more time because, as we know, a lot of them are going to be up in front of MPs - a lot of them ex-bankers of course by now. They're going to get quite a quizzing. Do you think that it's essential we see a change not just in individual rules and bonuses, but actually in bank culture, what banks do?

GEORGE OSBORNE:

The party is over for the banks. You can't go on paying yourselves twenty times what a heart surgeon earns, so that whole culture has to come to an end. And I think the bankers and indeed the Government have to understand you can't just reflate the balloon that burst. You have to look to a new banking settlement, a new economic model that is much more stable, that is much fairer to other parts of the country and other sectors of the economy. That in the end, you know... But that in the end...

ANDREW MARR:

(over) But if they won't do it for themselves, if they won't hand back the money, if they don't restrain as Chancellor you would have to move in and actually put a cap or something.

GEORGE OSBORNE:

Well, look, the Chancellor of the Exchequer and the taxpayer is underpinning the banking system. You can't have a system where you privatise the gain and socialise the risk; where you know if things are going well the bankers pick up the huge bonus and when they're not going so well, the taxpayer has to pick up the bill. And I think there is a role for government in ensuring that happens. And you know also government has to lead by example. There's a very interesting story in one of today's papers about the man they're going to appoint to the Head of the UK Financial Investments Authority...

ANDREW MARR:

Marino, yes.

GEORGE OSBORNE:

Glen Marino... you know who has apparently been advising an offshore tax haven about how to evade UK taxes.

ANDREW MARR:

Should we ask you some questions about that?

GEORGE OSBORNE:

Well I think it's important that the Chancellor clears up did he know this, is this the case, as it's reported in the Sunday Times, that this man has been helping people evade taxes - something that Gordon Brown said is wrong. And if it is, how can he possibly safeguard taxpayers' money in the future?

ANDREW MARR:

Well he's on shortly. For now, thank you very much indeed...

GEORGE OSBORNE:

Thank you.

ANDREW MARR:

...George Osborne.

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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