On Sunday 05 April Andrew Marr interviewed Alistair Darling, Chancellor of the Exchequer.
Please note ' The Andrew Marr Show ' must be credited if any part of this transcript is used.
Alistair Darling: Recession "far greater than people were predicting"
Alistair Darling: "2009 will be a difficult year"
ANDREW MARR:
The current Chancellor of the Exchequer, Alistair Darling, said recently that lots of people had predicted this crash and recession; it's just that they didn't mention it at the time.
How bad is it going to get now?
Alistair Darling, Chancellor of the Exchequer
The Chancellor is here. Thank you for coming in. Let's start with the G20. Sufficient but not enough?
ALISTAIR DARLING:
I think the G20 meeting last week was a major step forward and, frankly, 6 months ago you wouldn't have imagined getting the leaders of the world's largest economies together in the way that we did.
And I think it will make a very substantial difference, but obviously the test is whether or not everything we agreed is implemented and implemented fully, particularly in relation to protectionism because of the problems in relation to world trade. And of course it's got to be backed up by individual action by countries in every part of the world.
ANDREW MARR:
Was it an inevitable deal? Was it a done deal by the time people arrived, or was it right up to the wire?
ALISTAIR DARLING:
No, it wasn't. And, frankly, it wouldn't have happened at the end of the day if Gordon Brown hadn't locked the leaders up in a room and said, "Look, we've got to reach an agreement". Because of course if you've got twenty leaders, twenty prime ministers in a room, of course there's going to be differences of opinion, differences of emphasis.
You saw a bit of that in the lead up to the G20. But I think the agreement that we got, you know it should not be understated but we should be realistic too. We've got to make sure that everything that was agreed is actually implemented on the ground. That's actually going to … That will decide the extent of the difference that this meeting made.
ANDREW MARR:
And at what point did the idea of a further fiscal boost go? Was it after Mervyn King said look, guys, we can't afford it in this country? Or when?
ALISTAIR DARLING:
No. You know, firstly, last October, last November when the G20 met in Washington, it was pretty clear that all countries had to do something in their own economies. And indeed if you look at what I announced in the pre-Budget Report last November - about £20 billion going into the economy.
And as Mervyn King actually said in the same exchange, he said he fully supported that. And one of the reasons that he was optimistic that we'd get growth in the future in the world was for the same reason as he's optimistic we will have growth in the UK and that is because of the fiscal stimulus. Now there is a …
ANDREW MARR:
(over) But we couldn't afford a second one?
ALISTAIR DARLING:
Well I've always been clear about two things. Firstly, we weren't asking people to turn up in London last week with a new budget. You know people have to do what they think is right in their own countries. I have to decide in a couple of weeks time what I think is necessary.
You know for example if you take jobs with rising unemployment, it is quite clear that we need to do more to make sure that if people lose their jobs, we can help them get back into work as quickly as possible.
ANDREW MARR:
And how can you do more to do that given where the economy is now?
ALISTAIR DARLING:
Well in terms of jobs there's two things here which actually come to the heart of the difference, I suppose, between my view and the current Conservative view.
And that is the cost of doing nothing, as we've seen in the 80s and 1990s, would be colossal. If you simply say look there's nothing we can do, stand back, let nature take its course - I think that would be disastrous. The question I have to ask …
ANDREW MARR:
(over) Is what?
ALISTAIR DARLING:
Exactly. I have to balance the need to support our economy, to support businesses, to support families with the fact that you have got to ensure that in the medium term all countries live within their means. Now I have to reach a judgement and I will reach a judgement. I simply cite jobs and the need to …
ANDREW MARR:
(over) You say you want to help people get back into work and all the rest of it, or stay in jobs. Very, very hard given what's happening to the real economy and I wonder how you can do that. You can say you want to do it.
ALISTAIR DARLING:
I think on two levels. If you look at the problems we've got at the moment, there is no doubt that the depth of this recession here and across the world is far greater than people were predicting last year.
If you look at Japan, its exports are down 50%. If you look at Germany, its industrial production is down by 20%. Spain's is down. World trade has really ground to a halt.
Now that's why the international agreement at the G20 last week is so important because we've got to make sure we get world trade going again.
ANDREW MARR:
So …
ALISTAIR DARLING:
But that's got to be backed up by individual actions …
ANDREW MARR:
Sure.
ALISTAIR DARLING:
… and what people signed up to last week was we will all play our part there.
ANDREW MARR:
So all those numbers that we saw in the pre-Budget Report back in November must now be revised, presumably?
ALISTAIR DARLING:
I'll set out the forecasts in a couple of weeks time. But if you look at what happened in the back end of 2008, really what happened right across the world is economies saw severe downturn.
In the first 3 months of this year, I have seen nothing that doesn't tell me that this position is going to be equally bad. So what you're seeing is a much more severe depth of a downturn, and of course that will have an effect in countries right across the world.
What I do think though is that given what we have done in our own economy, it's not just the money we've put in to reduce people's taxes starting this week, increasing child benefit and so on. We're putting a lot of money into the economy.
So too is the Bank of England in kickstarting credit. And provided we can get bank lending going again, credit flowing, provided what we agreed last week is actually implemented, I remain optimistic that we will get back into growth. But what I am saying to you is …
ANDREW MARR:
So when …
ALISTAIR DARLING:
… 2009 will be a difficult year.
ANDREW MARR:
Difficult year. When commentators talk about the economy shrinking perhaps by 3% - that's ballpark fair enough, isn't it?
ALISTAIR DARLING:
Well I'm not going to get into what I'm going to be predicting in a couple of weeks time …
ANDREW MARR:
Sure, but just in rough terms.
ALISTAIR DARLING:
If you look at what has happened, the downturn since last autumn has been far deeper than I think people expected in any part of the world. And frankly what was concerning most of us is that some of the figures you're seeing from the Far East, for example, which was affected later than everybody else, that does affect trade.
We are a trading nation. We're a very open economy and that means that there is a greater depth. However, the fact is the money we're putting into the system - the money that we, the bank, the effect of what other countries are doing - will make a difference. It will come through. But you know I said earlier this …
ANDREW MARR:
(over) Is the fact that we are a more open trading nation, does that mean that more or less inevitably our contraction, the rate of our descent is going to be worse than many other countries.
ALISTAIR DARLING:
No, I think you're seeing broadly the same thing. America's lost four and a half million jobs in the last year. We are an open economy, we've been a trading nation for the last three or four hundred years you know not just in financial services but in other areas as well. If world trade goes down, we feel the effect of that.
Now that's why the meeting last week was so critical, because a lot of it was about getting world trade going again. And also to back that up you do need to take action here at home and this is where I think the Tories are just plain wrong.
Doing nothing, standing back would be disastrous. We've done that before in the 80s and 90s. I believe it is necessary for us to make sure that we support our economies. If we do that, then we'll come through it with less pain and the recession will be shorter than it would otherwise be.
ANDREW MARR:
But people should not be expecting growth this year and they should not be expecting another range of fiscal stimulus?
ALISTAIR DARLING:
Well I think - and the Governor made this point - there are areas where I think we will need to do more. And I come back to this point. Unemployment is rising.
It is necessary for us to make sure we do everything we can to turn people round if they lose their jobs. And it's worth bearing in mind that even today half the number of people who lose their jobs go back into work within 6 months. So we can …
ANDREW MARR:
(over) You're talking about things like training and credits and so on to get people back to work?
ALISTAIR DARLING:
It's training. It's about maintaining and extending the new deal. It's about making sure that when someone loses their job, immediately - not after two years or something like that, as we used to do in the old days - immediately you say to someone, "Right, how can we help you get back into work?" Now all the evidence is that approach works.
It doesn't just work for the individual - that's very, very important - but actually in the wider interest of the rest of us and the economy, it is very important that we do not let people lose their jobs and then simply leave them to get on with it. That is indefensible.
ANDREW MARR:
You've agreed a tough new scheme, it's said, to kind of rein in the bankers and the hedge fund managers, investment managers and their pay and how they remunerate themselves. Do you worry at all that so much of this economy has been based on these guys in the City of London and that they are simply going to leave and that we're going to lose a hu… you're going to lose a huge chunk of revenue as a result?
ALISTAIR DARLING:
Well firstly there's no doubt that the financial services sector, which was a major contributor to our tax income, is going to pay a lot less. You know their profits have just gone way down. And you know people are rightly concerned about the level of bonuses.
The downside is we don't get the tax on those bonuses if they're not being paid and that is actually driving a lot of the figures that you know people are talking about. That's why our income as a country has gone down. However, I do remain optimistic; that you know London didn't just build up its expertise as a financial centre in the last few years; it's been with us for actually you know decades, if not centuries.
ANDREW MARR:
Yeah, sure.
ALISTAIR DARLING:
It will come back. What I'm saying though it's got to come back in a different form.
ANDREW MARR:
Come back smaller perhaps?
ALISTAIR DARLING:
Well I think perhaps you know rather more chastened, perhaps you know rather more alive to the risks that are inherent in this sort of business. You can't go back to businss as usual. That's why …
ANDREW MARR:
(over) Well speaking of chastened or not chastened, Sir Fred Goodwin has become the sort of symbol at the moment …
ALISTAIR DARLING:
Yes.
ANDREW MARR:
… of the sort of struggle between politicians and bankers. Have you pretty much given up on getting some of his pension back from him?
ALISTAIR DARLING:
Well we're still pursuing that. You know the lawyers are looking at it. And you know I just wish that you know Fred Goodwin would actually …
ANDREW MARR:
He's not going to volunteer anything, is he?
ALISTAIR DARLING:
Well it doesn't look like it at the moment.
ANDREW MARR:
No.
ALISTAIR DARLING:
And you know this is something that does worry me.
ANDREW MARR:
Yuh.
ALISTAIR DARLING:
When we took over those banks, we inherited an awful lot of things that were very wrong. Now the new RBS, the new Royal Bank of Scotland, new management at the top - it will make a difference. It's starting to increase its lending again, it's starting to take account of the problems in the past, and again I think the bank will come through it. But we really do need to learn the lessons of the past …
ANDREW MARR:
Okay.
ALISTAIR DARLING:
… because whether you like it or not, we actually need banks just as much as banks need us. We've got to be able to put our money somewhere, we've got to be able to save. We need that money for lending for businesses.
ANDREW MARR:
What about all those local councils, charities and others, who put their money into Icelandic banks because there's a lot of people around the country worried about this? Can you bail out any of those organisations? Can you help any of those organisations?
ALISTAIR DARLING:
Well we'll continue to see what we can do there. The problem we had there is that these banks were of course regulated and supervised in Iceland and you know the system really wasn't very satisfactory, as you can see, because the banking systems largely collapsed. What I have done, I've been able to guarantee the savers in this country even though those are foreign banks.
ANDREW MARR:
But what about, for instance, charities?
ALISTAIR DARLING:
We will continue to see what we can do to help charities. I saw the Select Committee, Treasury Select Committee Report when you know it sought to make a distinction between local authorities, which broadly it said should have you know known what exactly the risks were and evaluated them.
ANDREW MARR:
Yuh.
ALISTAIR DARLING:
The problem we have though in all these things is that inevitably if you're putting money into savings or banks, you've got to take judgements.
ANDREW MARR:
Sure.
ALISTAIR DARLING:
And I've got to balance what it's right to ask the taxpayer in general to do as well as having to …
ANDREW MARR:
(over) Against past judgements by individuals. Okay.
ALISTAIR DARLING:
And …
ANDREW MARR:
Sorry …
ALISTAIR DARLING:
… charities are obviously, you know there's a lot of sensitivities there.
ANDREW MARR:
We're running out of time. I asked Ken Clarke about all these stories on MP's expenses. Your colleague Geoff Hoon all across the papers. This stuff is terrible for your government as well as being embarrassing personally to the ministers concerned. What's going to be done about it?
ALISTAIR DARLING:
Look, it is damaging. I'm in no doubt that we need to do more than just the party leaders' meeting, and that's going to happen anyway. I think there has to be some outside validation of this process. We need somebody outside. I don't think MP's can decide these things themselves because the public at the moment just would … it just won't wash.
ANDREW MARR:
So a new regulator as it were, a bit like the banks maybe?
ALISTAIR DARLING:
Well perhaps a pretty tough regulation. I think we do need to get an outside examination of this, so there are recommendations coming from people who've got no axe to grind. I think that's what the public want and they want it quickly.
ANDREW MARR:
Alright. Thank you for now very much indeed.
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
E-mail this to a friend 
Printable version 
Bookmark with:
What are these?