................................................................................ ON THE RECORD MAUDE AND DONNELLY INTERVIEW RECORDED FROM TRANSMISSION: BBC ONE DATE: 22.11.98
................................................................................ JOHN HUMPHRYS: Mr Donnelly, a very worried Theo Waigel there, bearing in mind that he is one of the architects of the Euro, deeply worried about what's going to happen to him, and it's your fault, your party's fault. ALAN DONNELLY: Well, it's rather amusing, since you have four million people out of work in Germany at the moment, and of course that was under Theo Waigel's management. The fact is that when the Finance ministers meet this evening, they will agree a policy that very strictly applies the Maastricht Treaty , that will look at labour market flexibility, reform of the capital market, but that will guarantee long term stability. A lot of the things that have been in the British press this week are complete fantasy. The Labour government and our partners in Europe, the other Social Democrat countries are very very firmly going to apply the stability rules, but what we want to do is make sure that we have flanking measures that can actually tackle the eighteen million people out of work in Europe at the moment. HUMPHRYS: So it is a policy that leans on social nudges here and there. I mean that's what this is going to be all about? DONNELLY: Well, what we want of course is to make sure, and we say this in this document, that we want countries to run a balanced budget over the economic cycle, but we do have to recognise that if there are particular problems in certain economies, then if a country is borrowing marginally for investment, then that is not something that should be frowned upon. And you know Mario Monti who has actually put this proposal forward is not a Socialist, he's a Christian Democrat, he's a Conservative, and so it's from the Conservative wing that we've had this suggestion of actually looking at public investment and excluding it from the calculation for the budget deficit. HUMPHRYS: So, Francis Maude, what are you worried about? FRANCIS MAUDE: Well, because this is what we've always said would happen with monetary union. It's producing in its wake a desire for ever greater co-ordination of policy and centralisation of policy. We always said that there is a huge risk that monetary union would create political union, and what this document is but the latest indication of it. You already saw Chancellor Schroeder last week, saying that monetary union was the first step towards political union. You then saw Jacques Santer last week saying the same thing, that there must be much greater control of countries' budget policies, going beyond what's in the Maastricht Treaty, and then the Italian Treasury Minister saying that what is needed now is a European economic government within the Euro area. This document that has been not in fact really the work of Mr Lafontaine but has been heavily driven by Gordon Brown himself, marks the next stage in this process which is the imposition of policies which go backwards, are regressive. You know, what is needed to deal with the problem of very high levels of unemployment on the continent is not a regression to more public spending, to slacker policies on borrowing - HUMPHRYS: Not even if it's spending on investment? MAUDE: Sorry. HUMPHRYS: Not even if it's spending on investment? MAUDE: Yes, but this business of saying - talking about spending on investment is totally bogus. I mean what Gordon Brown does is talk about all public spending as investment. He then says: well, it's alright to borrow money if it's for investment, but if you talk about all of your spending as investment you soon see that that's a pretty feeble - it's a flabby rule, and it's of no economic worth whatsoever. But you see what we should be looking at here is a process of driving forward labour market reforms which enable people to get work more easily, and yet both in Britain here you see the government reversing that, imposing burdens which make it more difficult, more expensive for employers to take on more people, and far from driving towards this kind of reform on the continent, you see it
going in exactly the reverse direction. The French are looking to a thirty-five hour week being imposed, it's exactly - it's going backwards, not forwards, and what this document does is simply to confirm that. HUMPHRYS: And putting this sort of pressure Mr Donnelly, on the Central Bank - I mean, the Central Bank is clearly worried, and it is a risky game this isn't it, because the markets don't like it and you undermine the Euro before it's even born. DONNELLY Well, listen, let me make very clear that this document, and I helped - I contributed to this document - we drew it up in collaboration with the European business community. It has a commitment to greater labour market flexibility, a reform of the labour market- HUMPHRYS: How can it have greater flexibility if you've got the sort of things that Francis Maude was talking about? DONNELLY: Francis Maude has just been making some statements that are incorrect. It refers to long-term stability, low inflation and the independence of the Central Bank, but what it calls for are some flanking measures, a new social market for the European Union. Now the thing is that we've got eighteen million people out of work in the European Union and we have to bring that unemployment level down within this policy of long-term stability. HUMPHRYS: And you'd approve of that Francis Maude? MAUDE: Well, except it's not what they're doing. The point is Alan Donnelly talks about the words that are being used, but you look at what actually is being done, and it's all going in a different direction, and all this stuff about relaxing the stability pact, of changing the Maastricht rules on budget deficits and all of that in order to make it easier to go into high spending, high borrowing plans, all of this is the flavour of interventionism, state activism which in the 1970s was totally discredited. HUMPHRYS: He's saying you haven't read the document - go on. DONNELLY: The problem with the Conservative Party today is it's so anti-Europe. It can't even focus in on what is written on a piece of paper. It is just fundamentally against the European Union and that's been the problem for the last eighteen years. MAUDE: Not in the slightest. I mean I have to say to Mr Donnelly, we've never fought an election on a pledge to come out of the European Union, which is what his own party did within my political lifetime, which isn't all that long. So I'm not going to have that kind of talk. HUMPHRYS: Let me come in here- MAUDE: -working successfully. What we are not in favour of is using it to impose on countries the sort of doctrines which have created on the continent very high levels of unemployment which are unacceptable. HUMPHRYS: Well Mr Donnelly is saying you have not read it and all of that is not in it. But let me put this to you Francis Maude, you do not want a strong independent bank here in this country, you don't approve of the powers that are being given to the Bank of England here and yet, you want this, the bank in Europe to be strong and independent of these pressures. Now that is a bit of a contradiction isn't it. MAUDE: No, it isn't at all because it's not what I've said. What I say is that you must have as monetary policy set in one of two ways. You must either have a Finance Minister, Chancellor of the Exchequer or whatever setting policy, being held accountable to it, to Parliament and the people, or you have a genuinely independent Central Bank which is free from political pressure. HUMPHRYS: That's what your man in the European Parliament says. MAUDE: Let me just finish the point. The point is that here in Britain that had been adultered already because the way in which it is set up with members of the Monetary Policy Committee appointed only for three years, so their appointments come up for renewal before the next election, and they're all appointed by the Chancellor of the Exchequer, whereas in Germany with the Bundesbank or in America with the FED, they are appointed for much longer periods and not by the government and the same direct say- HUMPHRYS: -so you'd approve what Gordon Brown would have got given a bit longer on the committee. MAUDE: Well what you've got here, I mean the point is that it cannot be left as it is because this is a botched and bungled job as we've repeatedly said. But what you've got here, both in the United Kingdom and in the European Union, is politicians who talk the language of independence and discipline and orthodoxy and stability but yet can't live by it because you've had Gordon Brown and his ...(interruption)..going round putting pressure on the Bank of England. You now see Mr Lafontaine putting pressure on the Bundesbank and on the- HUMPHRYS: Let me turn to this question Alan Donnelly of tax harmonisation, what that really means of course is putting up our taxes along with..to the sorts of levels that they are in Europe doesn't it. Now Tony Blair has said that's not going to happen, we are not going to see certainly our direct taxation going up. DONNELLY: It's not in this document either, John. HUMPHRYS: It's not in this-well isn't that the implication though. DONNELLY: Not at all. Shall I tell you, one of the things that's happened in the European Union now is a recognition that with a Centralised Monetary Authority, you have to have a decentralised and rather more flexible fiscal policy so that countries can respond. HUMPHRYS: What it says, can I just point out to you what it says: we should avoid (and I quote) 'we should avoid harmful tax competition' well if that isn't harmonisation. DONNELLY: Let me tell you what that specifically refers to, some countries use their tax system to offer hidden state aids and what we want to do is to make sure that state aids cannot be used in this way and that was a direct request from the business community. We have had two previous attempts to harmonise taxation and it was under the last government, it was when they agreed to give up duty free in Britain and when they took away the zero rating on heating fuel. They are the only two occasions when we've had tax harmonisation in the European Union and it was Francis Maude's party that was responsible for it. HUMPHRYS: Alright. Francis Maude can I turn to you finally on a different issue. Your party has been calling..your leader William Hague has been calling this morning for the resignation of Geoffrey Robinson because of his behaviour as a businessman. You've got problems of your own have you not. because it is reported that you didn't declare your interest in a company of which you are a director when you were arguing in the House for changes to the law, changes that would have benefitted that company of which you were a director. MAUDE: No, I don't have any problem because that's not what happened: (a) my interest was registered and is perfectly public knowledge; (b) the company of which I am a director doesn't have any interest in the way that's being alleged in this thing; (c) I wasn't arguing a case in the House of Commons. Apart from that, your information is entirely correct. HUMPHRYS: Well- MAUDE: You've been wrong on every point. There is no problem here, the fact is that Mr Robinson is in deep difficulty, he was rebuked by the committee last week, refused to resign to everyone's absolute astonishment. We now learn that the DTI is conducting a major investigation into a series of companies act breaches in his business career going through all the period in which he was deeply involved in Robert Maxwell's business empire. So, I mean, there is a series problem there. HUMPHRYS: But you didn't declare your interest in that debate did you. At the time of that debate you didn't declare your interest. MAUDE: (a) I wasn't taking part in that debate; (b) my interest was registered; (c) it was not a relevant interest to this debate. I followed the rules with scrupulous precision and the fact is there is nothing, no point of comparability here at all. Geoffrey Robinson has a huge amount to hide. He was intimately involved in the latter stages of Robert Maxwell's business empire and persued a pattern by which he tried to hide all the stages of that connection. It's now that we need to catch up with him. And this is just a pathetic little diversionary tactic and I'm sorry to say..see that you're going along with it. HUMPHRYS: Well, it is being reported this morning and it's our job to ask the questions that arise. So there we are, Francis Maude and Alan Donnelly, thank you both very much indeed. And that's it for this week. Good afternoon. ...oooOooo...