................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 20.4.97
................................................................................ JOHN HUMPHRYS: Good afternoon and welcome to the second On the Record debate, live and with a studio audience. This week the economy - the one issue we're told really decides elections. We'll be joined by Kenneth Clarke, Margaret Beckett and Malcolm Bruce and they'll be debating the questions that YOU want asked after the news read by CHRIS LOWE. NEWS HUMPHRYS: This election campaign has been a bit odd because normally the big fight is over the economy. Other things seem to have overshadowed it a little this time. But when it comes to putting that cross on the ballot paper on May 1st the parties believe what will matter to most of us is what it will mean for tax, for spending and for jobs. In other words, as the American Democrats put it so succinctly: "it's the economy stupid". Well with us are the Chancellor Kenneth Clarke; Labour's Trade and Industry Spokeswoman Margaret Beckett and the Treasury Spokesman for the Liberal Democrats, Malcolm Bruce. The questions will be put by members of the audience and I'll try to make sure that they get answered. And our first questioner is Mrs Edith Russell. Mrs Russell what would you like to ask? EDITH RUSSELL: Yes, which party can I vote for that would guarantee we will never go into a Single Currency and if there is a referendum which of you will campaign for a vote against? HUMPHRYS: Chancellor, can you..is it your party that will guarantee they'll never go in. It is the only one of this lot isn't it. KENNETH CLARKE: No, it's not because as I repeated yestersday we have a policy of deciding that in the national interest at the right time which I think is identical to both of the other parties, or almost indistinguishable. Going back to what you started on, just to put that into context. Yesterday I did a press conference and I started by saying that the issue of the Election was: it's the economy stupid. And I made a long statement about the economy and then what I found was that the national obsession with the Single Currency took over and I re-stated our policy again. Let's put them together, I think the key thing in the Election is how do you keep Britain the best performing western European major industrial economy. How do you keep unemployment falling, how do you keep living standards rising and how do you keep Britain a leading power in the world. That is how we should look at the argument about the Single Currency. When the time comes we have to decide will this keep the major international investment that comes to Europe flying into the United Kingdom if we join or if we don't. Will this help us to create the conditions in which British business can create more jobs or not, if we join or if we don't. Will our living standards go on rising faster than they're rising elsewhere in the Continent if we join or if we don't. And I won't give a longer answer. I continue to repeat, I always have, that I could be on either side of that question. Until we know which countries are joining, and what the state of their economies is and what basis they're going to run a Single Monetary Policy it is not in the national interest to make that decision. And one thing I make quite clear I'm flatly against handing over control of tax to Europe, flatly against controlling handing over control of public spending to Europe, so is every other European Finance Minister I know; no-one's even suggesting that. And the narrow issue of Monetary policy and the currency, eventually we should make a decision on the grounds of national interest when we know a lot more about it. HUMPHRYS: And Mrs Beckett, couldn't put much between that position and your position could you? MARGARET BECKETT: No you couldn't. We are also flatly opposed to any change in the way taxation policy, public spending policy is handled but you said quite specifically could we guarantee that under a Labour Government Britain would never go into a Single Currency. No we can't guarantee that because our view - very strongly - is that it has to be Britain's interest that is the key determinant in the decision first that is taken by the Cabinet of the day, then that it is put to Parliament and then in what Tony Blair has called the "Triple Lock" would have to come to the verdict of the people. And you ask secondly.... HUMPHRYS: Just explain what the Triple Lock is for people who don't know. BECKETT: A decision in the Cabinet to recommend that it was thought to be in Britain's interests on balance and to recommend entry and then a decision...that decision put to and endorsed by Parliament and then, of course, that decision put to the people for their final say. So that is very much our view. You ask which of us would campaign for a vote against. Well, of course, the question wouldn't arise unless it was thought to be in the national interest that the vote should be For. This time I would be on a different side. When we last had a referendum on whether or not Britain should stay in the European Union I campaigned and campaigned very strongly that we should not go into what was then the European Economic Community. HUMPHRYS: Were you wrong? BECKETT: One of the...I think some of the fears that we had have not turned out to be true but the whole position has completely changed. We were talking then about joining a community of six countries, we're now in fifteen and rising. The countries with whom we were in partnership then, the EFTA countries and so on are themselves either members or on the way in. But one thing I would say to you that I find quite extraordinary about this debate and I think the others will confirm this, everything that's being said now by people say in the Referendum Party about how all of this was unforeseen, about how none of this was mentioned, I'm afraid it's not so. It was all spelt out, it was all discussed and aired. People may or may not have decided to take it seriously but it was all on the table twenty-two years ago and now we have made our decision, it's how do we make the best of where we are now. HUMPHRYS: Malcolm Bruce, your position is different because you start off predisposed to going into a Single European Currency because you are much more European than either of the other two parties, right? MALCOLM BRUCE: In principle. I think you've got to ask two questions. First of all, there is a discussion about a referendum because the Liberal Democrats were actually the first party to commit themselves to a referendum on the issue of a transfer of powers that a Single Currency would represent. So a referendum is something that we accept on the grounds that it is such a change, it wouldn't be in our economic interest to go in if it was thought that we might pull out later because we didn't have the consent of the people. So we do think that's important. But we've made it also quite clear that you should look at why the whole issue of Monetary Union is being advanced and why thirteen members of the European Union are convinced that it's something which is a goal to be won and what they believe is that it will give them greater stability, lower interest rates, lower inflation and a better climate for investment. Now if that is something we can win it is our view that is worth having. The question you have to address is under what conditions would it be in Britain's interest to join and in our view if the convergence criteria are met and no fudged by the founder member countries, if we in Britain meet the criteria and if the people of Britain have backed that in a referendum supported by the Government of the day, then we should go in and I think there's two questions arise from that. Will the Labour Party tell you under what conditions they would recommend staying in or going out? And I have to say I genuinely respect Ken Clarke's position, which is very close to mine and to ours. What I can't understand is how he can stay in a party where two thirds of his candidates have said they will not back his line and he couldn't deliver it. HUMPHRYS: Answer that Mr Clarke? CLARKE: Well.....what I keep doing is restating the party's policy... HUMPHRYS: Yeah, because a lot of people say you don't believe it. You see, that's the point. CLARKE: I do. Now I always get accused of being divisive when I repeat it. BRUCE: No, he believes it. It's the candidates who don't! CLARKE: Oh, no, no. I give it back...a Party's policy and I think so but the Labour Party, rather reluctantly, came along and fell in with it, although Margaret is a very reluctant convert. You do have a genuine choice here. HUMPHRYS: Oh, she admitted that. CLARKE: Margaret carried on arguing we should leave the European Union a very long time after the last referendum. She's a very late convert to the cause of the European Union. BECKETT: Only fifteen years ago - yes. CLARKE: So far as the difference between Malcolm and myself is concerned, there is a difference. He says that they are predisposed as of - as he says - thirteen other governments in Europe to join if they can possibly get the conditions right, and so on. I think, it is a more open question. Nobody ever takes any notice of my saying - and, I have repeated it for the last couple of years - that I believe in certain circumstances that we should stay out. If they fudge the Convergence criteria - to use part of the jargon. BRUCE: Well, so would we. CLARKE: So would you. Well, that's - we converge in the middle. BRUCE: No, you haven't. I don't think so. HUMPHRYS: But, the problem, Mr Clarke- CLARKE: At this stage, we have to decide to keep ourselves involved. We should be a leading Member of the European Union. We shouldn't be imagining European plots against us. We should be realising we are competing very well - first time in my lifetime against Germans and French - and, we should have as much influence as them- HUMPHRYS: The trouble is- the trouble is- CLARKE: -and we should reserve the right- HUMPHRYS: The trouble is those-those plots are in the minds of your own members, aren't they? Of your own supporters? Within you've got more - more than two hundred Conservative candidates saying: we won't accept that position! CLARKE: Well, well, the plotting line - and, I think, it's arising largely out of the campaigning of the Referendum Party and the position of quite a number of the Right-wing newspapers. But- HUMPHRYS: Well, I'll just mention to you one of the Conservative candidates! CLARKE: All I'm doing is setting out the policy. I-I believe and the last opinion poll I saw on this was the most encouraging I've seen so far. Over seventy per cent of the public. One opinion poll said we should leave the question open and decide it in the national interest. I don't think most of the members of the public I meet think they know enough about it! I think, they're likely- HUMPHRYS: Alright. Well, let me ask you a question that I think brings (phon) people- CLARKE: ...decide on the question at a sensible time and we agreed - oh, well over twelve months ago - have a referendum - if we decide, the Government decides that we want to go in. HUMPHRYS: Let me ask you a question, then, that-that-I think, perhaps, most people will understand because it's a very simple one and it has to do with the survival of Britain as a nation state. Do you believe that the survival of Britain as a nation state is at risk because of what is going to be on the agenda at the Inter-Governmental Conference of all the Members of the European Union in Amsterdam in June. Do you accept that? CLARKE: No, I don't. HUMPHRYS: Well, Michael Howard, the Home Secretary, does. CLARKE: I don't think the survival-I don't think the survival of Britain as a nation state is at risk from our membership of the European Union and I just don't hold that view. But, what I do think is at risk is whether or not we can be a leading - if not the leading - European power in the next century, beyond the Millennium. I think, we are catching up. We are going to overtake in economic power quite a lot of our European neighbours. I think, we have a big role in the world to play and, I think, everything depends on our sustaining our economic success. Where I do agree with all my colleagues is big, big issues are at stake in the Inter-Governmental Conference at Amsterdam; that a big, big question arises over Monetary Union, if all the others are - it seems clear - are going to go ahead with it. And, it is extremely important that the right person is engaged in those negotiations. I- HUMPHRYS: But, you- CLARKE: I've had more rows with other Europeans. I've been isolated in councils of Ministers - different councils for the last eighteen years. HUMPHRYS: Isolated in the Cabinet, too! CLARKE: The two things is to win the important things for this country. BRUCE: But, how can you do that, Ken, if your Party won't back you? You have a situation where- CLARKE: Well, that's over. BRUCE: Yes, but if the Conservatives were to win this Election - which, admittedly, doesn't look likely - but if they were, it would be winning it with a majority of candidates who have campaigned in the Election saying: they will not under any circumstances go in for European Union. Your position is open, honest, understood, it's practical, it's in touch with business and economic interests but your Party's deserted you. How can you stay there? CLARKE: Well, I don't think-there are rather more of the Party than usually appear in these head counts. If you just look back at what's happened. When we had all these arguments - and I won't dwell on this, over twenty odd years ago - I was in the House when we had the vote in principle, which like all the big European issues was decided on a free vote on cross-Party issues. If Margaret had been there, she would have been voting vehemently against our ever joining in the first place. So, did a lot of Conservatives, as I recall. We are now a more powerful nation than we were then. We are a more successful nation than we were then. I have taken part in countless European rows over the years. In particular, when I was Employment Minister ten years ago, I was arguing against what is now the Social Chapter - its over-regulated labour markets, against all the things that the Germans and the French and the Belgians can now see- HUMPHRYS: Yeah. Right. CLARKE: -are costing them jobs. HUMPHRYS: Right. CLARKE: Our flexible labour markets inside Europe show what we're gonna achieve and we're showing the rest of them what we can achieve. HUMPHRYS: Yeah. Difficult for you, isn't it, Margaret Beckett, because you have changed your position? BECKETT: No, I don't find it in the slightest bit difficult. The British people made a decision. That decision was overwhelmingly endorsed at the following General Election and the whole circumstances - that was, as I say, the initial thing was over twenty years ago, all the circumstances have changed. All our links are now with Europe, our trade is very heavily with Europe, the countries with whom we were previously associated outside Europe are, themselves, Members. And, indeed, I think, it's actually-I think, it is actually going to be more difficult for Britain to lose, in terms of people's concern about our degree of control over our own affairs now than it was when there were only six or seven. You cannot - it seems to me - create the kind of structure out of fifteen, maybe going on eighteen, states that you could if you were only talking six or seven - but, that's the past and I'm not really bothered about that. I'm perfectly happy to talk about the future, as well as about the past. And, Ken Clarke said something very revealing there: he said what was important was whether you had the right person involved in what I entirely agree are these very key negotiations and I think what is absolutely crystal clear from the last few days is that no one in a Conservative Government is the right person to attempt to carry out those negotiations because they don't know what Party they're negotiating for, they don't know who's on their side or against them. They cannot fight for Britain because they're much too busy fighting each other - practically, as far as I can see, to the death. And, the notion that Ken Clarke or-He said they always have backed me so far. This is the man who was called Joe Bloggs by his Prime Minister, who said - HUMPHRYS: What! BECKETT: Who said he wouldn't be reappointed, probably as Chancellor of the Exchequer- CLARKE: No, I wasn't! BECKETT: If that's backing! My goodness, Ken! CLARKE: Steady on! You're getting worse than The Sunday Telegraph on... BECKETT: Impossible, impossible. HUMPHRYS: Alright! Alright, on that thought we will go to a question about tax from Mr Pattison. MR PATTISON: Good Afternoon. Under which one of you will ordinary people be paying less tax in five years' time? HUMPHRYS: Right. Five years' time, less tax - from you Mrs Beckett - well not you personally, but the Labour Party - if you're in power. BECKETT: If we become the government ordinary people will see a reduction in VAT on fuel, they will not see the rate of their income tax put up. As it becomes possible we will start to try and introduce the starting rate - a lower starting rate of ten pence, because we do recognise that people when they do come into the tax bracket, do start to pay more, and so we believe that that does mean that ordinary people will be treated much more fairly under the tax system... HUMPHRYS: Will pay less tax was the question, BECKETT: ... than they are today HUMPHRYS: Will they pay less tax after five years was the question. BECKETT: Well, we start getting then into territory about whether or not this is against inflation and so on and so on, but yes, certainly the whole thrust and direction of our approach to tax policy is to recognise that it is ordinary people, I think the latest figures are everybody on under sixty-four thousand pounds a year, which may include most, not all of us in this room - ordinary people are now paying more in tax, they're paying more in Income Tax and National Insurance and in indirect taxes, and it's that direction that we want to reverse, so that ordinary people are not paying more. HUMPHRYS: Right, so you are going to do all the things you say you're going to do, and they're going to end up paying less tax? BECKETT: What I'm saying is that our - all our tax policies lead us in the direction of more fairness for ordinary families, not of an increase in their tax burden, which is actually built into Mr Clarke's spending programme. HUMPHRYS: Malcolm Bruce, you obviously can't give us that answer because you tell us you want us to pay more tax, you want us to pay a penny more tax income for education and all the rest of it, so we're bound to pay more tax under your lot. BRUCE: Well, no, you're not, because the proposals that we're putting up, fifty per cent of tax-payers will actually be better off under our proposals, but fifty per cent will pay more. Because what we're proposing is two things, one, because people are concerned about health and education and the need to put money into it - we alone of the three parties are prepared to commit money to those and to ensure that we do get nursery education for every three and four-year old, smaller class sizes, that we do get more books and equipment and help with special needs education, that we do get more nurses and doctors and we do get free eye tests and we do get free dental check-ups and a freeze on prescription charges, all paid for by specific costed tax increases. But we also believe that the people who have high earnings in this country should make a contribution to helping people on low earnings, which is why we propose a fifty per cent tax rate on earnings over a hundred thousand pounds, which will use to raise tax allowances by two hundred pounds. That takes half a million people currently paying tax out of tax altogether, and it means that half the tax-payers will actually be better off under our proposals, even though they're getting investment in health and education that Labour and the Conservatives are denying them. HUMPHRYS: Chancellor, less tax - five years? CLARKE: Well, certainly compared with either of the other two, without a doubt. I think it's quite an easy question for me. What ..... HUMPHRYS Haven't done it for the last five years. CLARKE: Yes, we have indeed. No, no, tax depends on the level of public spending, and tax depends on your ability to control public spending, complicated because we've also got to get down to the level of public borrowing, and the figures last week showed that we are. You have to do all those things because that's the way of keeping recovery in place, that's where you'll get more jobs, that's where you'll keep inflation down, that's the way you'll keep on out-performing our rivals in international economy, and I have delivered very tight control of public spending in which I always increase spending on health, on education and the police service, three priorities which have to get more money within what can be afforded, and that is what we will continue to do. I've published my plans and as and when, but only when we can afford it, the scope for more tax reducations - I believe in tax reductions, not as a way of just helping out, you know, getting votes. I believe in tax reductions because one reason why we succeed as a country is when a much lower tax economy, particularly direct taxation, than we used to be in former decades. We used to see it as a July budget coming from the Labour Party. (sic). The windfall tax is raising taxation. They're going to spend all that money - they're billions of pounds short on their other promises, they generally are - there's.....a very respected journalist today showing their education policies are billions of pounds short of any funds they, over any funds they can raise. The July budget which a new Labour government if we have one will introduce a few weeks after the election will not only have a windfall tax which you'll all pay - it won't just be paid by fat cats.... HUMPHRYS: Alright, don't dwell on it. We'll deal with a windfall tax later. CLARKE: As for Malcolm, he admits he would raise tax. I mean the Liberals again. We're being very polite to each other Malcolm, very bad for us (phon), you at least admit that you're going to raise taxation, but boy, you don't half spend it...(talking together).. HUMPHRYS: Let me ask Margaret Beckett, and this is not asking you to anticipate the July budget, because I know you won't do that apart from windfall tax which we've heard about. BECKETT: We haven't won the election yet. HUMPHRYS: If you find, and indeed you haven't won the election - if you find, if you are in power, that the Labour government has a bit more money in the coffers than it thought it might have had, borrow a bit less - would you use that money to spend it on public services or to reduce the national debt, or to cut taxes? Now that's a matter of principle, it's not a specific question about what policies you've got, but as a matter of principle what would you do - what are your priorities. BECKETT: Well, I will frankly concede that I haven't given that a great deal of thought... HUMPHRYS: A hugely important question. BECKETT: No, because the notion that we might inherit a better financial situation from the Conservatives than we anticipate is something that hasn't actually crossed my mind. HUMPHRYS: But you keep telling us how much better you're going to do than they, so you may find yourself with more money than you thought you were going to have. BECKETT: I'm afraid, contrary to what Ken Clarke says about how wonderfully well we're doing, I think we are very very nervous indeed that our financial position is not as sound as he says, (INTERRUPTION) and I believe we need the room for.... HUMPHRYS: .... or the year after that. What are your priorities. Is it to spend money or what? BECKETT: Ah well, that's a slightly different context. I take your point completely. Yes, no, the reason that we have to have a July budget is because we need the Windfall Tax. HUMPHRYS: I understand that. BECKETT: In order to start our programme of employment and training. HUMPHRYS: Talk about that later but this question.. BECKETT: We've also made it very very plain that as that begins to release resources education will be our priority. We've got obviously the very earliest pledge where we think by phasing, well we know that by phasing out the Assisted Places Scheme we can cut class sizes in primary schools but we also want to increase the opportunity of nursery places and to do more elsewhere in education. So that is very much our priority. HUMPHRYS: Ah right. So the priority is not to cut taxes, or indeed to cut the national debt. Your priority, first priority, if you've got any spare money at any stage is to spend it on education. BECKETT: I wouldn't say - at any stage - as time goes on, that room for manoeuvre becomes greater we may find that we're able to improve education and also begin this start. You see we take very much the view that creating a new climate in which people feel it is very much to their advantage to work and there is real work and employment available is what needs to happen. Now one of the things that we think would help with that is a new starting rate, a lower starting rate of tax of ten pence. So that is something else that we will be looking at to try and do because we want to encourage people back into work because we think that in itself is important. HUMPHRYS: Chancellor, a clear question, if there's spare money it will go on education. In your case - no, no, don't deal with what Mrs Beckett just said if you would - in your case, if you had that spare money, where is your priority - the priority? CLARKE: The spare money is not there if we're going to get to a balanced budget by the end of the century or to Gordon Brown's aims, although in fact it's going better than I forecast at the Budget, as the Public Borrowing figures last year...last week showed. We are well on course as things stand. My priorities, I've always...demonstrated in four Budgets, even my first two very tough Budgets, more money for health, more money for education, more money for the police service. The other two tried to over bid that but the laws of mathematics have just been abandoned by Margaret. She's giving out money here, there and everywhere. She's old Labour, she needs the progressive tax to spend more. BECKETT: Ridiculous. Listen my tax plans added up at the last Election it was yours that didn't. (LAUGHTER AND APPLAUSE FROM THE AUDIENCE) CLARKE: Let's take Tony Blair's....I took part in a lot of Election debates last time. There's not a quote on me that anybody can hold against me. If you look at Tony Blair's contract with Britain, a glimmick he's borrowed from Newt Gingrich of all people. But anyway the first item, the first item of Tony Blair's contract with Britain is to increase the amount we spend on education as a proportion of GDP. Now somebody's done a calculation, a newspaper today which I can't fault, showing... HUMPHRYS: Can we do that later. CLARKE: Up to ten billion pounds going to spend on that. HUMPHRYS: Forgive me for trying to shout you down but do leave that for a moment because I promise you we are coming back to that. Just be quite clear, your priority, if there's a bit of extra money sloshing around is to spend it on education not to cut taxes. And you Malcolm Bruce would take much the same view I gather. BRUCE: We've don't both. HUMPHRYS: Well I'm asking you about the future, not about the past. BRUCE: I think the Chancellor is a little too complacent because he says borrowing is coming down very well. Borrowing is still running at twenty-four billion pounds, that's what his government claim is the peak of an economic boom. When Nigel Lawson was at the peak of an economic boom for which we all paid for later, he was repaying debt. He had a net surplus. The borrowing is too high and that's why interest rates are so high and would be..will be even higher after the Election because the Chancellor has not acted on the Bank's advice. But that being the case the priority must be to keep borrowing down and to bring it down and to balance it over the cycle. That's why you have to find more money if you are going to deliver a difference on health and education which Labour won't. And indeed Labour have adopted the Conservative Party's spending framework in their manifesto they say for the next two years Labour will work within the departmental ceilings for spending already announced. How on earth are they going to make a difference in health and education if they're going to be
implementing Tory spending plans. HUMPHRYS: Quick answer to that Margaret Beckett. BECKETT: We've made it plain change priorities. For example, phrasing out the Assisted Places Scheme pays for those places in primary schools. HUMPHRYS: Okay, we said we'd come to the Windfall Tax. We are now, Jonathan Ashley has a question about that. JONATHAN ASHLEY: I work in a private pensions market and like most pension funds we invest in the shares of companies such as water, gas and BT. Is it not so that it will be ordinary people that are investing for their old age that will be hit by the Windfall Tax on those companies and not just the fat cats? HUMPHRYS: It is isn't it Mrs Beckett? BECKETT: No, because all the evidence, as I am sure you are well aware, you did say you are in the City, all the evidence from the City is that people are fully aware of our plans for a Windfall Tax, as they should be, they've been around for long enough, and that they are completely discounted in the share price. Indeed, only last week, the American purchaser of one of the, I think it was one of the Electricity Companies, said quite openly and bluntly that yes he knows all about the Windfall Tax, it's in the share price and he doesn't expect it to have a major impact and as we get nearer and nearer to the Election that is more and more universally the response and indeed, we've made it plain that of course we would consult the regulators about implementation of the tax and the Electricity Regulator has specifically said that of course he wouldn't allow it to be taken out of the hands of customers. HUMPHRYS: Malcolm Bruce. BRUCE: Well I think it's unreasonable to believe you can take billions of pounds out of privatised utilities and have no effect on the economies of those businesses. That doesn't make sense. The problem is that the windfalls were taken several years ago and the people who've taken those windfalls have now gone. There's something wrong, in principle, about a Windfall Tax because it's retrospective. It's supposed to be a one-off but the Tories had one once so you have the problem that people now begin to see this as a norm and that will cause uncertainty in other sectors. HUMPHRYS: The Tories was on the banks and they hit them at the time when they were making the big profits that's the difference. BRUCE: Of course but there's still a principle at stake. They did hit them at the time, rather than a long time afterwards - that's true. But, the reality is if you take money out of those utilities, it could hit investment, which could prejudice electricity supply and water supply or it could hit dividends, which could affect pensions, or it could hit prices, or a combination of all of those things and to take billions of pounds out of an industry and assume it has no impact is not credible. It is a fig leaf to disguise the fact that Labour does not have a credible means of funding the promises it's making to the Electorate and indeed it's a one-off. So what happpens in years two, three, four and five - the Labour Party won't tell us. HUMPHRYS: Well what happens in years two, three, four and five? BECKETT: We've made it very plain that this is a proposal for funds which will kickstart a programme which is widely - universally, in fact - believed will in the longterm, be self-financing. But, another way of putting what Malcolm Bruce is saying is the Liberals don't want to tax the privatised utilities. They'd rather tax you. BRUCE: No, we'll tax them fairly, on the basis of what they've earnt. HUMPHRYS: Ken Clarke, they've had a pretty good run for their money, haven't they? CLARKE: Well, I don't think Margaret's answer to either Malcolm or the questioner - "well, perhaps, the share price has already gone down, so we've already done the damage".. BECKETT: I didn't say 'perhaps'. CLARKE: ...is very, very, very.. HUMPHRYS: She said it had been discounted. BECKETT: That's what the city says. CLARKE: Discounted, by which she means they've already dropped, which I don't think is necessarily the case, and I think, consumers know this will be affected. You can't have billions of pounds' worth of levy in this way - doesn't have an affect on - not only the Pension Funds, who are invested in them - but the cost to the consumers as well. HUMPHRYS: But you did it to the banks. CLARKE: When the banks made all those profits over ten years ago, the banks...it wasn't anything the banks really did, except interest rates went up to levels which I'm glad to say I have put far behind us in this country and they just automatically made money without having to do anything. What the utilities did was they were sold at what was then believed to be the market value and they brought down the cost to consumers, changed their business a lot and now the Opposition turn round and say they look a bit too profitable, we're going to get a levy out of them. That's a very dangerous tax. The pensions impact is important because the best hope we have for steadily raising the prosperity of people in retirement in this country in future, comes from the fact that more and more of us are in funded pension funds. And people in this country have got to understand there is no disconnnection between the performance of shares and the performance of stocks and the performance of private companies and their own pension fund and their pension's expectations. And for the Labour Party to sort of dismiss that kind of thing shows that they are a very backward looking Party. The fact they won't really tell us about the Windfall Tax shows that this July Budget is shrouded in a total mystery, which ought to alarm most members of the public. HUMPHRYS: Loads of unanswered questions about it, Mrs Beckett. BECKETT: I thought Budgets were supposed to be shrouded in a degree of mystery. HUMPHRYS: Sorry? BECKETT: I thought Budgets were supposed to be shrouded in a degree of mystery. I remember you... CLARKE: Well, I'm not going to have one. HUMPHRYS: You're not going to have one! CLARKE: 'Till November. HUMPHRYS: Oh!
BECKETT: He means in July. HUMPHRYS: I thought that was an admission then. CLARKE: I'm not going to have an emergency Budget in July. You can have me as Chancellor, there is no Windfall Tax, no tax increases. I haven't got plans until next November's Budget. They've got plans for ten weeks away and they won't even tell you which companies are going to pay the Windfall Tax. HUMPHRYS: Why not, Mrs Beckett? CLARKE: There are more alarming things than that that they won't tell you. BECKETT: Because as Ken Clarke knows perfectly well - and I don't know why he puts on this silly act (LAUGHTER). Chancellors do not draw up legislation which name company x, y and z. What they do is set categories and then within those categories you see who is affected and as I say, we will discuss that with the regulator. But there are just another of couple of very brief points that I want to make. HUMPHRYS: Very brief. BECKETT: First of all, every time the focus comes on the utility companies - whether it's a potential takeover or something of that kind - suddenly, they turn out to be awash with hundreds of millions of pounds of money they never mentioned before. And Malcolm Bruce talked about their investment programme. Many of the companies in these sectors are being heavily criticised by their regulators for their failure to keep up the investment programmes for which they have taken money from the customers. BRUCE: But they won't be able to do it if you take the money off them in tax. BECKETT: Malcolm, they have got money they have not spent on investment. BRUCE: But, you're going to take it off them, so that will affect the investment. BECKETT: They've got money that they have put aside in preparation for the Windfall Tax. BRUCE: No. BECKETT: You want them to keep it, we want to use it to create jobs. BRUCE: No, we want them to invest it. We want them to invest it. HUMPHRYS: Question about unemployment from Sean Cronan. SEAN CRONAN: Yes. Can any of you offer us the perspective of getting unemployment below one million? HUMPHRYS: Offer the prospect of getting unemployment below one million. It's way above it at the moment - about one point seven, one point eight. Malcolm Bruce. BRUCE: Well it's, in fact, probably over two million because you've got hundreds of thousands of people who are actively seeking work that the Government doesn't count in their unemployment figures. They know they're unemployed, but the Government doesn't count them. (APPLAUSE FROM THE AUDIENCE) BRUCE: I'm not going to suggest to you that there's an easy solution. If there was, I hope we would be implementing it and we wouldn't have unemployment in other countries. So, I think, people who do offer you simple solutions are being simplistic, by definition. But, what I do think we have to do is ensure that in this country, which depends for its livelihood on trading our goods and services, we have a highly skilled, well-trained and educated workforce and it's our belief that we need to do two fundamental things. One, is to invest in our education, which is woefully below standard, to ensure that our school-leavers are trainable and ready to be part of a successful economic workforce and for employees to be required to give them the kind of training that will skill them to make this nation competitive. Secondly, we need to ensure that people who are long-term unemployed, who haven't got the skills are given means of getting back into work, by enabling them to take their benefit with them into a job which gives them the opportunity to get into work experience and the employer as an incentive to give them the skills because they get a contribution from the benefit that will make them a valuable member of that company. And, in that way, with a good economic policy, with stable low inflation, low interest rates and good investment and a skilled trained workforce, we can compete in the world and bring unemployment down. But, to do that you've got to invest in Education, you've got to invest in Training and that is why the Liberal Democrats have said that that is our overwhelming priority and it needs the money now, which is why we, alone, are prepared to say we'll put taxes up to fund the investment so this country can bring down unemployment and compete in the world - the others will only promise but they will not deliver. HUMPHRYS: Margaret Beckett, it used to be the Labour Party's firm pledge, top of the list of priorities to create full employment - don't hear that anymore. BECKETT: No, I don't think that's either true or fair. We are committed to high and stable levels of employment. HUMPHRYS: Higher - not full employment? BECKETT: Well, to getting towards full employment, but we are very mindfull of exactly the point that Malcolm Bruce made right at the outset. You set a target of a million, but of course, I think there are those who argue that it's something more like three to four million. I mean when Ken Clarke was tallking earlier on about comparisons with France and Germany and elsewhere, as some recent report from I think the Hong Kong and Shanghai Bank has looked at levels of unemployment, and suggested if you are comparing like with like and looking at all of those people who like work - who are seeking work - you're looking at figures far higher even than on the official figures in France and Germany. You could be looking at maybe, certainly two - maybe three, maybe four million, so it's a very high target that you're setting, and I think all any of us can honestly say is that it is a very high priority for us to create employment. That it has to be with a training element, because people do need those extra skills in order for themselves as individuals and the companies they work for and the country to prosper. But it's also very important that we break the part of the cynicism that's been engendered where training's become almost a dirty word because people regard it as a makeshift simply to keep them out of the unemployment figures, and providing good employment opportunities, real employment, and real high level skill training is very very important for that reason. HUMPHRYS: But an old Labour Government, if I'm allowed to use that expression, might have said, would have said: We'll spend money on this and if it means borrowing a bit more, even risking inflation a little bit, we will do it because we believe in creating employment. We don't hear that from you. BECKETT: What you hear from us now is that we are absolutely determined not to run any risks with the promises that we make. Of course we can say if things go better than we fear, we hope to be able to do more, but people feel so much that they've been let down by politicians, feel so much that their confidence has been betrayed, that we are absolutely determined to make concrete promises that we know we can deliver and then to sketch out the direction in which we can go if we're able to do more. HUMPHRYS: Ken Clarke, the worrying thing surely you accept this, is that unemployment is still historically very high indeed - one point seven - even if we accept your figure which they don't - but we
accept your figure, and yet we've been in a boom, the economy has been growing for three or four years apparently. What on earth is going wrong - why is .. CLARKE: It's happened in most western countries. I won't give you a long academic reply, but certainly it is historically high, it's too high, and in answer to the question, the honest answer is I can't give you a guarantee it will come below a million, but I'd very much like to continue trying to get it down to the lowest possible level consistent with our having growth and low inflation and keeping our present rising prosperity lasting. And it's come down all the time I've been Chancellor. The argument about the figures is frankly a rather silly diversion. We do produce two lots of official figures. We produce the claimant figures, and we also produce what are known as labour force surveys used by every other developed country across the world. Both of them are moving down in parallel, they come to slightly different... BRUCE: But three hundred thousand different Ken, three hundred thousand is a lot of people. CLARKE: No, but they're moving in the same direction. I mean if you're trying to judge macro-economic policy and putting
that plain Malcolm, to pretend the British labour market is not tightening and that the number of jobs is not increasing all the time and unemployment coming down is to argue an absurdity. The IMF, the OECD, the European Union all accept we've got our unemployment down below the levels of others, but we, the key thing is how do you keep it going further. You can't spend your way to more jobs which is actually - I don't know why Margaret denied it - the Labour Party say the windfall levey will take a quarter of a million off the unemployment figures. I think that's old Labour nonsense. What you can do is keep in place the kind of conditions we have now with a flexible labour market. What we don't want is all these old-fashioned Social-Democrat ideas that if you have what we call the Social Chapter, what it actually means is all kind of restrictions on the way in which you can hire and fire and employ people who have a minimum wage at the level that makes any difference to the wages people actually earn, you look at the continent and you will see it drives up unemployment. HUMPHRYS: Alright. CLARKE: ...tax and spend. BRUCE: That isn't true, and the evidence is to the contrary and I think the government cannot go along getting away with the idea. The reality is, if you look at comparable studies the levels of unemployment in this country are probably nearly as high as France and Germany, but we've just changed the way we count them. CLARKE: No, no. HUMPHRYS Alright, let's look at the question of job security. Now Tim Lord has a question on that. TIM LORD: I'm currently employed on a short term contract. Can any of you guarantee me increased job security in the future? HUMPHRYS: When you say a short term contract you mean how long? LORD: One year. HUMPHRYS: Right, and you regard that as not being very secure? Right, can anybody guarantee? Chancellor, can you guarantee him something longer than that? CLARKE: One of the key things as I say, the next Election should be about jobs. I mean it isn't just "It's the economy stupid". The next election should be about jobs, whether we're talking about the economy or we're talking about Europe because we need to keep the nmber of jobless going down. What would be a disaster would be a government to promise to legislate to make your contract longer, because fewer people would get contracts at all if you go back into that Social Chapter pattern. I realise the desire to make jobs more secure. Young people like yourself, older people in their fifties who can only get sort term contracts when they've lost their long-standing job before need more security. Security comes from the real economy, it comes from growth, it comes from what I - I'm slipping into jargon today - I talk about tightening the labour market. What that means is more employers are creating jobs and going out looking for people and firms are actually shedding jobs to make themselves more competitive, and the more it becomes a market for those that are looking for a better job and it's more difficult for employers to find the people for the jobs they want then all our employment's getting more secure. That is happening now certainly compared with two years ago, but we must make sure that lasts, and these two would turn what's happened on the last two years completely up on its had (phon) again. HUMPHRYS: Right, Margaret Beckett, job security, that's what we're talking about here. BECKETT: It is yes. Not for the first time if I could just mention what Ken Clarke said about the Social Contract is nonsense. It's got nothing whatsoever to do with the Social Contract, but that's par for the course. You asked whether anybody can promise you that you would have something more than a short term contract and of course it would..no-one can because you never can say to one individual yes you'll get a job. All you can say is what you can do to make it more likely. Now, I think there are two things that strike me from your situation. One of them is that of course it's..it will always be the case, it has always been the case that there might be people who found themselves in circumstances like your own but part of what is important is how confident can you be that at the end of that contract there is the possibility of another one. And while of course we have what's usually euphemistically called a flexible labour market in Britain today, what we haven't got is what we call flexibility plus. Flexibility plus encouragement support, help to get other placements, flexibility plus the training and the skills that might enable you to move on should the contract that you're on come to an end, and I think one of the things that's happened more widely, the second point I want to make, across the workforce is that employers have been encouraged to take account only of the short-term advantage to them of simply being able to pick people up out of the labour market and let them go again without much thought for the consequences. But there are also very great advantages in a company and a country that aspires to be the best in the world, that aspires to succeed on quality. There are great advantages in having a more stable workforce who are being encouraged to develop their own skills and capacities and that of your company. And that's something I think we've lost sight of and if we can get that cultural change, then indeed the prospects for people of your generation and people like you are much better, they're more secure and also we think, in the long term, they deliver more for Britain. HUMPHRYS: Malcolm Bruce, are you worried about job security? BRUCE: I think millions of people are worried about job security. I think that the problem I meet in my own constituency, because a lot of people are working on..in the oil industry have gone onto short term contracts, exactly as the questioner is talking about. And the effect of that is first of all they have to pay for their own holiday, they have to pay for their own pension, they have to pay for their own sickness benefit, they have to pay for their unemployment. It's employers opting out of the things that they used to give to long-term employees and that's why there isn't a feel-good factor from the Conservative Government's point of view because too many people feel insecure in their employment and we do want to ensure, for example, that short-time workers and workers on part-time have rights as well as responsibilities and I would also suggest that we..because we have a proposal that all companies apart from the very small should have a obligation to pay two per cent of their turn-over into training, that they would then invest that training in their workforce and realise the value of retaining people on longer term contracts in order to retain the value of their investment. So we hope, that those measures would give people greater security. And I think it's all very well to say that there's lots of jobs floating around, but people have to plan their lives, their families, their mortgages, and that kind of insecurity is very unsettling indeed. HUMPHRYS: Well let's continue to talk about employment. Donald Robson has a question about the minimum wage. DONALD ROBSON: I'm a small businessman and many of us have to run a tight ship to survive. If we have a minimum wage won't it increase costs so much that some firms..with some firms that people may have to be made redundant? HUMPHRYS: Commonsense isn't it Margaret Beckett? BECKETT: It's not what has happened in any other developed western economy. Everyone, apart from the United Kingdom, including the United States, where recently they've created ten million jobs, has some kind of minimum wage or minimum wage protection and indeed in the United States, they've managed both to increase the level of that wage and to increase the number of jobs simultaneously. I think what is happening is that as people focus more and more on what we're actually saying about a minimum wage and not the nonsense that they hear from the Conservatives, they are less and less frightened of its impact. The Federation of small business at its recent conference actually carried a resolution saying yes a minimum wage would be acceptable and we're seeing increasing numbers of surveys from various management institutions, groups of exporters and so on but there's another side of the coin you know, particularly in fact for people who do seek to export, people who do run their business by providing quality goods or service and that is that a lot of people in small businesses are finding their business threatened because cowboys who have..against whom there are no safeguards and where there is no level of minimum standard of any kind, are undercutting them and driving them out of business. And again, more people in small businesses are realising that as long as it's for everyone there are advantages for them too to such a system. HUMPHRYS: Ken Clarke if those cowboys exist you're the ranch hand aren't you? (LAUGHTER AND APPLAUSE FROM THE AUDIENCE) CLARKE: It's endearing to hear Margaret talk about cowboy companies, we used to have all this when we talked about privatisation, you always said we're going to hand it all over to cowboys. It's again old Labour language I'm afraid Margaret and I thought we'd moved out of that. Seriously on the minimum wage, there are two types of minimum wage that exist in the world. There are ones where the governments allow the minimum wage to fall to such a level that it makes no difference because nobody's going to be paid that little anyway and there are others where governments have pitched the minimum wage where it does make a difference, above what employers would otherwise pay and when you have that kind of minimum wage it drives up unemployment, as you can see from quite a lot of the continental countries and it's impossible for people to argue out of that. John Prescott, and to be fair to him, gave up trying to argue his way out of that some time ago and I don't know why the Labour Party don't face up to it. They should tell us what level it's going to be at, it's another of these things, they know it's a mess so they won't tell us what they're thinking of. They're going to consult, they say, but we must know whether it's two pounds or so, three pounds or so, four pounds or so, and the more effective in one way you make it, the more you'll find the jobs that you say are going to pay that are all vanishing. The best example is France I think. France has, I think, if I'm right, I think, I'm being cautious, three million and rising unemployed and it has a terrible, terrible level of youth unemployment and the French Government recently tried to abolish their minimum wage for youth unemployment in order to get their youth unemployment down to create some more starter jobs for young people coming out of schools. Riots took place, I'm afraid the French Government gave in to the riots, they kept their minimum wage, that's why France's got youth unemployment now. HUMPHRYS: Let me go, still on this question of wages and spending and all that. Sally Weeks, who is a nurse. SALLY WEEKS: Nurses haven't had a pay rise greater than inflation for years. Many are now leaving the profession and I'm one of them. Who, out of you, will give nurses a decent pay rise? HUMPHRYS: Malcolm Bruce, a decent pay rise she wants. BRUCE: Well we supported the recommendations of the pay review body, which was not over generous but was at least in line with inflation and are the only one of the three parties that believed that it should have been implemented in full and unphased because there was money in the budget for that and sadly Labour and the Conservatives decided that was not good enough. We do take the view that you cannot build a National Health Service which is seventy per cent dependent on its cost on staff if you demotivate and demoralise the staff and do what you're doing and drive them out. We do not think that phasing something like that is justified. HUMPHRYS: You'd put more money in then would you? BRUCE: Well, actually, the money was in there. That's what's ever more objectionable. And, I think, that the Chancellor is very confident in suggesting that we are in a situation where living standards are rising. That's a proud boast of the Government and if that is the case, why should people working in the public sector be denied a share in the rise in living standards that's available to other people in the country. They are working for the country, on behalf of the whole of the country and they're entitled, at least, to share in what is happening elsewhere in the economy and the Government and the Labour Party won't even give you that. HUMPHRYS: Why should they, Chancellor? Nurses, in particular - two and a half per cent pay rise - the rest of us are getting five per cent - give or take. Why should they suffer when the rest of us are doing better? CLARKE: They're not suffering. They will see their living standards rise. HUMPHRYS: That lady's leaving the profession because of you - leaving the NHS completely. CLARKE: No, no. Well I hate to use the first disagreement of fact which I think we've had in this debate, but I mean...I set up the nurses pay review - Norman Fowler and I set it up, at the end of a very bad strike, shortly after this Government came to power. Since that time, nurses living standards have steadily risen, particularly in comparision with most other public sector people. It was before then they had starvation wages and all that. They're not all leaving. HUMPHRYS: Why are they leaving, someone says. We've got eighteen thousand vacancies unfilled. CLARKE: They're not all leaving. Turning to this year's figures, they're amongst the only people whose pay has gone up faster, are nurses in the public sector or doctors. MALE HECKLER: MPs. HUMPHRYS: MPs everybody says. HECKLER: Twenty-six per cent. CLARKE: I mean, that's the same with all of us. But MPs actually have fallen...risen by far less over the last seven years. I voted against the MPs' pay rise this year - you ask the other two. No, no, no you are trying to divert me onto an amusing topic. But, all I'm pointing out is nurses' pay as a percentage has gone up far faster than any other public sector worker, including MP - apart from doctors - since we've been in power. BRUCE: Why are there so many unfilled vacancies? CLARKE: What's happened this year - Malcolm says is the money there? There frankly, isn't. We've restricted the pay bill effect this year to two point four per cent. The fact that by the end of the year, the pay bill effect will be two point nine per cent, I think, and the inflation is going to fall below two and a half per cent later this year. Individual nurses get more than those pay bill figures. HUMPHRYS: Right. CLARKE: Individual nurses are going to get three/four per cent this year - the whole country has seen living standards rise. BRUCE: They didn't get it last year. CLARKE: They did last year. HUMPHRYS: Let me- CLARKE: Living standards are rising because we're now accepting sensible levels of pay rise in line with above low levels of inflation. HUMPHRYS: Right, you make that point. CLARKE: And don't let anybody take us back to the days where living standards went up any other way. HUMPHRYS: Margaret Beckett, you would not give the nurses more money either? BECKETT: We are very worried, indeed, about the number of nurses leaving the profession and worried, too, about the number of people who are not coming in. HUMPHRYS: Well, being worried is one thing, giving them money is another. CLARKE: ....an endorsement- BECKETT: Will you shut up and let me answer the question. (APPLAUSE FROM THE AUDIENCE) HUMPHRYS: Well, in case anyone didn't hear the Chancellor he said you gave an endorsement to his approach. CLARKE: I agree. That's what Gordon says with me. BECKETT: Sorry about that. As I was saying. And, we're also very worried about the fact that people aren't coming forward to train either, which is a very serious source of worry. Now, Malcolm says that the money was there in the Budget to pay the pay increase in full. And, of course, if it had been, that would have been a different matter. But, it was our understanding that it was not there to pay the increase in full and that's why the increase was phased. And, that's the position that we would inherit. But, of course, one of the things that-Two things that are making the position worse and making it harder, at the moment, which is something a different government could change. First of all, what is making it worse and it's a small scale thing but it's the kind of thing that upsets people and makes them more likely to take the kind of action you're taking. And, that's when the average pay across Chief Executives goes up by six per cent and yours doesn't. Now, I know that conceals some great variations but it does also bring with it some - and that really annoys people. HUMPHRYS: The other point quickly, then - the other point. BECKETT: The other point is the costs of local pay bargaining. Ken talked about setting up the pay review body and he, in particular, both as Secretary of State for Health and as Chancellor has driven that pay review body to try and make them recommend - clearly, against their will - local pay bargaining. The RCN suggested that that was going to cost the National Health Service something like forty million pounds a year. I haven't seen the latest estimates on what the outcome of that is but that is money that could have been used actually to pay more. HUMPHRYS: Right, let's stay with public spending, public services. Education: Mrs Elizabeth Ashley has a question about that. ELIZABETH ASHLEY: Thank you. As a teacher, I've seen big cuts in school resources, what assurance can you give that there would be no more redundancies for teachers, more funding for books and less children to each class? HUMPHRYS: Your extra penny on tax isn't going to do all that, Mr Bruce, is it? BRUCE: It is going to do exactly that. That's entirely what it is focused upon. Our proposals for putting what would be two billion pounds a year, ten billion pounds over a full Parliament into Education would be to deliver nursery education for every three to four year old whose parents want it, to ensure that there were no class sizes over thirty in primary schools one to seven and that the books and equipment were increased. And, in the first year, a double injection of books and equipment in order to make up for the backlog. That is the minimum in our view that Education needs. It's not a question of to avoid cuts. Even to build back any of the damage that's been done under the Conservative Government proposals. HUMPHRYS: Right. Margaret Becket you said that you've attacked the Tories for taking three billion out of the Education Budget. Are you going to put it all back in? BECKETT: Well, Malcolm's being too modest actually. They aren't just promising all of that. They're also promising more people in higher education, more people in further education, more of everything you could- BRUCE: Sorry, that is not-That is not out of a penny on Income Tax. HUMPHRYS: But, deal, if you would - deal with the question I just put to you. BECKETT: It's in your Manifesto. BRUCE: It is not out of the one penny on Income Tax. HUMPHRYS: You've said- You've said they've taken three billion out. Are you the-Would a Labour government put it all back in? BECKETT: The first step that a Labour Government is pledged to take is a step which goes to you at the third part of your question, which is to cut class sizes, where by phasing out the Assisted Places Scheme we can reduce class sizes in every primary school for five, six and seven-year-olds. Now we understand that that's not by any means the full scale of the problem, but that's-The whole point of that particular pledge is that it is demonstrating within the resources that are there now that a government making different choices can look after all children and not just a few children. You asked about whether or not anybody could pledge there wouldn't be more redundancies. Well, obviously at this moment in time the impact of Budget cuts is going through and no one can turn that round in five minutes. HUMPHRYS: Right. Right. A final word from the Chancellor. Would you turn that around? Would you say: We've gotta put more in? CLARKE: Oh, I do put more in. I mean I won't challenge the- HUMPHRYS: Very briefly, we've got about twenty seconds. CLARKE: I thought the mathematics of both my colleagues are seriously at fault. We put more money into schools each year -
we have to ensure it gets passed on to the schools. We have new proposals to make sure Labour, Liberal and other County Councils actually pass onto the schools the money that we give them, that the proportion kept at the centre - which in a typical County Council is still about a quarter of everything I allocate for schools - should in future to a much greater extent be put in the hands of the Governors and the Head Teacher so they can spend it on teachers and books, which is what I intend it to be spent on. HUMPHRYS: There we must end it. Kenneth Clarke, Malcolm Bruce, Margaret Beckett, thank you all very much indeed. Next week the Deputies have their day. That's to say Michael Heseltine, John Prescott and Alan Beith. Meanwhile you can keep in touch with us on the politics pages of Ceefax starting on Page a-hundred-and-twenty and through our new internet site. The address ought to be on your screen now through the magic of technology and will appear again at the end of our credits. Until next week good afternoon. ...oooOooo...