PLEASE NOTE "THE ANDREW MARR SHOW" MUST BE CREDITED IF ANY PART OF THIS TRANSCRIPT IS USED THE ANDREW MARR SHOW INTERVIEW: GEORGE OSBORNE, MP CHANCELLOR OF THE EXCHEQUER NOVEMBER 27th 2011 ANDREW MARR: So Tuesday is the big day for the Chancellor, George Osborne. His autumn statement will give the Commons all the figures for how the economy is performing and the outlook for the months and indeed years ahead. And, as we've heard, all is not entirely tickety-boo. Mr Osborne is with me now. Good morning. Can I start by looking at the deficit reduction plan, which has been at the heart of your purpose in government. It is no longer the case, is it, that you're going to get rid of the structural deficit by the end of this parliament? It can't be done. GEORGE OSBORNE: Well, first of all, I wouldn't say the reduction in deficit is the heart of our purpose in government. The heart of our purpose in government is to get the British economy moving … ANDREW MARR: (over) Alright, very important then. GEORGE OSBORNE: No, but that is crucial … ANDREW MARR: Yeah. GEORGE OSBORNE: … and to do that, you have to command confidence in the world in your ability to pay your way and ability to pay your debts. You can see that with what's happening from our near neighbours. Now we have got a deficit reduction plan that has brought us record low interest rates, that has earned us that triple A credit rating, and we are absolutely going to stick to that plan because that is what is helping Britain weather this international debt storm and is also helping us lay the foundations of a stronger economy. ANDREW MARR: Sure. But you said that you would get rid of the structural deficit by 2014/15. Is that still possible? GEORGE OSBORNE: Well we set up two rules: one, we would eliminate the structural deficit actually on a five year horizon; and also … ANDREW MARR: (over) You said by 2014. GEORGE OSBORNE: (over) … and also that we would get debt falling by that year. And you know we will be, by the end of the parliament, we will be judged on that by the independent Office for Budget Responsibility that we have set up. ANDREW MARR: (over) Sure. The reason I'm asking you … GEORGE OSBORNE: (over) And can I just … ANDREW MARR: (over) … is I'm trying to calibrate … GEORGE OSBORNE: (over) Yes, I know. ANDREW MARR: … quite how serious the situation is that the government is facing and the country is facing. And I put to you … I mean you did say … GEORGE OSBORNE: (over) Yes. ANDREW MARR: … 2014/15, we'll get rid of the structural deficit. Actually, I put it to you, you won't. GEORGE OSBORNE: Well can I just say unlike my predecessors, Conservative and Labour, I have set up an independent body that studies whether what I'm saying is true, whether I've met the targets that I set out. Now I am confident we are going to meet the targets that we set out - the fiscal mandate, the debt target that we set out - but the judgement about whether we have or not is made independently of me. It is not announced by me on the Andrew Marr Show. It is announced by the independent Office for Budgetary Responsibility, so you don't get chancellors fiddling the figures, massaging the figures … ANDREW MARR: (over) I'm not suggesting you would. I'm just asking about … GEORGE OSBORNE: (over) … and the rows between No. 10 and No. 11 that characterised the previous government. You know that is different now. We have an independent body. I am absolutely clear the government will do what it takes to meet its fiscal mandate, to meet its debt target, to show the world that Britain (with this very high budget deficit) can pay its way and keep those very low interest rates without which families watching this, businesses whose employees and employers watch this would be in real trouble. ANDREW MARR: That body that you talked about, the Office of Budget Responsibility, is going to … its figures are going to come out on Tuesday and no doubt you've seen them already. To cut to the chase, these figures are going to be pretty dreadful, aren't they? GEORGE OSBORNE: Well if you look at published independent forecasters, let's talk about them, you know they have clearly told us what we already know, which is that the economic situation facing many countries at the moment is very, very difficult. That has clearly had an impact on the United Kingdom, on our growth prospects. It is a challenge for our public finances. But, frankly, you know you could get almost any finance minister in Europe or indeed in the Western world … ANDREW MARR: Sure. GEORGE OSBORNE: … to sit here today and they would say something similar. But what I'm able to say … ANDREW MARR: (over) But I've got you. I've got our finance minister … GEORGE OSBORNE: (over) No, no, I know, but what I would say that is different from some of the other finance ministers at the moment is that our plan has commanded confidence. We are taking Britain through a very, very difficult international situation. We're also dealing with Britain's legacy. You've just had Ed Balls in this chair. You know he and his colleagues, Gordon Brown and the like, ran up enormous debts, and paying off that debt, dealing with the aftermath of the banking crisis of course is a challenge for this government. ANDREW MARR: Yes. GEORGE OSBORNE: Do I wish you know we were not in the situation where we had enormous debts we'd inherited, we didn't have the Eurozone creaking on our doorstep? Of course I wish these things, but that's not the world we live in. ANDREW MARR: Sure. GEORGE OSBORNE: I've got to deal with the situation as I find it to keep Britain safe in these difficult times. ANDREW MARR: What I'm trying to do is to get a description of the world or the economy that we live in. Growth, which was predicted at 1.7 per cent this coming year, is going to be 1 per cent or below, isn't it? GEORGE OSBORNE: Well, again, the independent forecasters, currently published independent forecasters have a range of estimates around the number that you talk about … ANDREW MARR: (over) But you wouldn't just … GEORGE OSBORNE: (over) But no, no and we're going to find … ANDREW MARR: (over) … you're not going to sit here and say they're wrong? GEORGE OSBORNE: Well what I'm going to say is let's wait … If you want to see the government's independent forecast, let's wait till Tuesday. But, look, international bodies, forecasters in the private sector, they're all saying the same thing, which is the British economy has slowed. By the way, so has the American economy … ANDREW MARR: Sure, sure. GEORGE OSBORNE: … so has the German economy, so has the French economy. Now I'm not talking about … ANDREW MARR: (over) But sticking with our economy. GEORGE OSBORNE: (over) That is not only … I'm not using that as an excuse. I'm using it as an explanation for why this is an exceptionally difficult time. And I think what is almost unique about the crisis we face at the moment - certainly unique to our lifetime - is that we have a slowing economy, a slowing world economy, we have this financial crisis brewing in Europe. And what is at the heart of this? A concern about governments' ability to pay their debts. So you can't do what would have happened in previous recessions - just turn on the borrowing taps - because there's not necessarily anyone out there in the world ready to lend to you. You know we have got to earn our credibility. That's why we can borrow. That's why the British government is going to be selling its debt over the next week, the week after and so on. But we are not facing the same kind of debt strike, borrower strike that you get in other European countries at the moment … ANDREW MARR: (over) I want … GEORGE OSBORNE: (over) … including some that aren't in the Euro … ANDREW MARR: Sure. GEORGE OSBORNE: … and that is because of the credibility we've earned. ANDREW MARR: Alright, alright. I do want to come onto other European countries later on. But in essence, what became called Plan A was that if you got spending under control, if you got the credibility that you were talking about, if you got the shrinkage in the public sector of all those jobs going, the private sector would rush in and pick up the deficit - would produce the jobs, would produce the growth - and the problem that you've got is that that second bit isn't happening. True? GEORGE OSBORNE: Well Plan A, as people have called it, is all about credibility on Britain's very large budget deficit - one of the largest in the world. Alongside that, we have to lay the foundations of economic success in the future and move away from the economy that was based on the success of one sector, the City of London, in one corner of the country to a more balanced economy where we invest in our infrastructure, in our education, we have a welfare system where it pays to work. You know we will be setting out all these sorts of measures on Tuesday … ANDREW MARR: (over) Sure, but the problem that you face … GEORGE OSBORNE: (over) … to get the private sector into a more competitive place, so that actually British companies can compete now not just against their European counterparts but against companies in China and India and America as well. ANDREW MARR: So there is a problem of getting the private sector moving again, and that is what you're going to address or try to address this week. GEORGE OSBORNE: Yes. ANDREW MARR: Can I just go through some of the measures … GEORGE OSBORNE: (over) Of course, yes. ANDREW MARR: … that have been discussed. Perhaps most importantly, this idea of credit easing or getting cheaper money directly to small and medium sized businesses for whom that would be an enormous thing. Now, as I understand it, the plan is to underwrite cheaper money, which will then go via the banks to the companies. GEORGE OSBORNE: Well the basic idea of this National Loan Guarantee Scheme, as we're going to call it, is to use the fact that the government can borrow money very cheaply to help small businesses borrow money more cheaply than they do at the moment. So the government will underwrite the loans the banks make to small businesses in order to cut the interest rates that small businesses pay. That will help with their cash flow, that will help them retain their workforces, that will help them expand and invest. So we're using the fact we've earned those low interest rates as a government with the very difficult decisions on spending we've taking in order to get lower interest rates for businesses up and down the country. ANDREW MARR: And how much money is going to be available in this scheme? GEORGE OSBORNE: Well we are making available £20 billion for the National Loan Guarantee Scheme. However, it sits within an envelope that could be as large as £40 billion. Now these are guarantees. We're not borrowing this money to you know ourselves as a government. We're underwriting the loans that are being made. But we're using our good name … ANDREW MARR: Sure. GEORGE OSBORNE: … our credit worthiness. There are many government… ANDREW MARR: (over) But on behalf of … GEORGE OSBORNE: (over) Can I just say there are many governments at the moment … ANDREW MARR: Right. GEORGE OSBORNE: … that couldn't operate a scheme like this because they wouldn't be regarded as credit worthy enough to do it. It's actually using the very hard decisions we've taken to benefit small businesses. ANDREW MARR: On behalf of taxpayers up and down the country, however, a note of caution. If banks get into trouble, if businesses who've taken this money get into trouble, in the end the taxpayer is standing behind it. So this is not a decision without risk. GEORGE OSBORNE: Well of course we make a balanced judgement about the risks we take in the economy. I think this is actually relatively low risk for the government given the strength of our balance sheet and our low interest rates and the credibility we've got in the world. We are underwriting the loans the banks make to the small businesses, so the banks ultimately are carrying the credit risk of the loan to the small business, and we've worked … you know we've worked with the banks to make sure this is a sensible scheme. But it means if you're a small business for example currently borrowing money at 5 per cent, we might be able to reduce your interest rate to 4 per cent. That cuts by a fifth the costs of the interest you're paying. (Marr speaks over/not audible) If you've got a £5 million loan, that's £50,000 extra in cash flow, £50,000 to help you expand and invest. Now that is you know what we can do with our credibility to help small businesses. ANDREW MARR: Yes. GEORGE OSBORNE: We've offered something similar on mortgages for first-time buyers into new build homes, so that we can help the construction industry get those new homes built, help create demand for new homes, help families who can't possibly at the moment afford a deposit to pay for one. ANDREW MARR: Okay, can we just move … GEORGE OSBORNE: (over) So you know in all sorts of ways we're trying to not as a nation deliberately borrow more money and risk our low interest rates, risk our triple A credit rating … ANDREW MARR: (over) But do everything else you can? GEORGE OSBORNE: (over) No but use absolutely every other tool at our disposal to get the British economy moving … ANDREW MARR: (over) So let's just ask … GEORGE OSBORNE: (over) … to pull us out of the … ANDREW MARR: Sure. GEORGE OSBORNE: … situation that many other countries find themselves in as well at the moment. ANDREW MARR: Let's just ask about another of those things in the toolkit then, which is the notion of bringing forward and boosting in a major way infrastructure spending - roads and rail and so on - and getting pension funds to pay for that. Given that they don't want to take the risk at the moment of going into these big schemes, how are you going to tempt them? GEORGE OSBORNE: Well British pension funds have not been investing the savings of British people in British infrastructure. Now we are hopefully going to change that. We have signed an agreement with the big pension funds that will see them investing British savings in British infrastructure, building an economy based now on savings and investment rather than on debt, and at the same time overhauling British antiquated road network, its energy system, its telecommunications network, its Broadband network - you know actually building the things we need to have a more balanced economy. ANDREW MARR: Okay. GEORGE OSBORNE: You know we have behind us the City of London on this set. You know the City of London has done very well over the last ten years and financial services of course is very important to our country. But beyond the City of London, we have got to get the rest of the economy moving … ANDREW MARR: (over) You're going to bring in … GEORGE OSBORNE: … and infrastructure is absolutely essential to that. ANDREW MARR: Sure. I'll ask you directly - going to bring in a further bank tax? GEORGE OSBORNE: Well I'm going to set out any tax measures on Tuesday, so it wouldn't be fair to pre-announce it. ANDREW MARR: (over) Alright, fair enough. GEORGE OSBORNE: But I'm very clear the financial sector has had to make a contribution and we've introduced a permanent bank levy. Each and every year the banks pay a tax which they never paid in the past. So that we are all in this together. All parts of society, all parts of industry are contributing to the economic recovery. ANDREW MARR: A lot of people say looking ahead to the strike planned for Wednesday that people at the bottom are actually make a disproportionate sacrifice and the better off are still not doing their share in this crisis. GEORGE OSBORNE: Well you know I've attracted a lot of criticism by, for example, suggesting that child benefit should be taken away from higher rate taxpaying families. I get a lot of letters from people. I understand that's a difficult decision for those families. But I did that and I took other measures, like on the banks, to make sure that all sections … ANDREW MARR: (over) Further such measures coming for the rich, better off? GEORGE OSBORNE: I have to say I don't think those families with child benefit would regard themselves as rich, but they are better off compared to other parts of society. It was a difficult decision, but I am trying to be fair in a very, very difficult place where Britain has borrowed far too much money and we've got to pay back our debts. And in the end that money has to come from the British people … ANDREW MARR: Yes. GEORGE OSBORNE: … and from a growing economy. ANDREW MARR: You're having as a government an argument with the trade union leaders, but do you personally have sympathy with those really quite poorly paid public sector workers who are going to have to be paying more and working longer for a much poorer pension in some cases? GEORGE OSBORNE: Well I think there's actually a lot of misinformation around. I mean for ex… ANDREW MARR: (over) Well some people are in that situation. GEORGE OSBORNE: (over) Well I'm sorry, Ed Balls was on this chair a few minutes ago saying that people earning under £15,000 are having to pay more. We've explicitly excluded people on very low salaries from paying more contributions for their pensions. You know I think what's on offer is a good deal. ANDREW MARR: Are you sympathetic to public sector workers who are angry or not? GEORGE OSBORNE: Look, what I am trying to do is give them a good, decent pension for many, many years to come - much better than you could get if you were in the private sector these days. We got the last Labour Pension Secretary, Lord Hutton, to come in to do a report for us. ANDREW MARR: Right, okay. GEORGE OSBORNE: We're using that report as the basis of a deal that is fair to the taxpayer, but also fair to the public sector. They will get in many cases a bigger pension than they've had before. ANDREW MARR: Right. GEORGE OSBORNE: Yes, they'll have to retire later or pay more contributions, but we're all having to do that because our society is older and our country is in more debt. ANDREW MARR: I must try and ask you about the Eurozone before we finish. Do you think we now face the danger of countries having to leave the Eurozone or indeed the Eurozone itself beginning to break up? GEORGE OSBORNE: Well of course countries like Germany and France have now openly asked the question whether countries like Greece can stay in the Euro. It is a very, very difficult and dangerous situation. And in a way if you want a sort of microcosm of my life at the moment as Chancellor, on Tuesday we've been talking about the statement I'll deliver to the British Parliament. I then have to get on a train and go to Brussels for a meeting of the European finance ministers to talk about the Eurozone crisis … ANDREW MARR: (over) Yes and you've got a … GEORGE OSBORNE: … and it is having a hugely chilling effect on the British economy at the moment. ANDREW MARR: And you've got a plan, do you - I hope you've got a plan, presume you've got a plan for what we do if the Eurozone collapses completely? GEORGE OSBORNE: Well we have contingency plans for all situations. We have obviously stepped up that contingency planning in recent months. You would expect us to do that as the British government. But that doesn't mean we are predicting any particular outcome. We're just ready for whatever the world, whatever the Eurozone throws at us. ANDREW MARR: And what would it do to us as a country if the Eurozone now did collapse? GEORGE OSBORNE: Well a disorderly collapse of the Eurozone would have a massive impact on the UK. I mean, for example, one in seven pounds we export doesn't go to the Euro. It goes to … ANDREW MARR: (over) So it'll be really bad? GEORGE OSBORNE: No, one in seven pounds we export goes to Ireland, Italy, Portugal, Spain and Greece. Just those countries. ANDREW MARR: Alright. A chilling thought to end on, but we must. GEORGE OSBORNE: (over) So in other words, it's a very important part of our economic strategy that we get the Eurozone moving as well. ANDREW MARR: Alright. Thank you very much indeed, Chancellor. INTERVIEW ENDS
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