............................................................................... ON THE RECORD AN INTERVIEW WITH NORMAN LAMONT MP RECORDED FROM TRANSMISSION: BBC-1 DATE: 27.11.94 ............................................................................... JOHN HUMPHRYS: So, Norman Lamont, former Chancellor, we're going to talk about all that in a few moments, if we may. But, first, let me just ask you about all the speculation there is in this morning's papers and everywhere else, for that matter, that you have been approached as a possible stalking horse candidate to challenge John Major. NORMAN LAMONT MP: Well, in the last couple of weeks, I've several times publicly said that I had no intention of participating in a Leadership Election. That remains the position. Can I also say: I noticed in the news clip, at the beginning of this programme, an appeal from the Home Secretary for me not to vote against the European Finance Bill. The Home Secretary is an extremely good friend of mine and will remain so. There has never been any question, I've repeatedly said, sometimes I wonder quite what I can say. I appeared on a television programme, said I wasn't going to vote against the European Finance Bill because it would be absurd for me, who's involved in it to do so, and the news immediately after the programme, led with an item saying I was leading a revolt on it. So, don't believe everything you read in the newspapers. HUMPHRYS: So, if - at some time, during the next few days - you are approached by some people, some Tory Backbenchers, who say: Norman, we've got the thirty-four signatures for that letter, we're going to send it off to Marcus Fox, if you will be our man, what will you say to them? LAMONT: Well, I've told you what the situation is and I can't envisage circumstances that would change that. May I say: I don't think that there will be a Leadership Election. I think, the Chairman of the Conservative Party was quite right in what he said. There will not be a Leadership Election. I'm not quite sure why everybody thinks I'm so desperate to get involved in this matter. I'm quite enjoying my life on the backbenches. I enjoy the freedom to speak out, say what I feel about issues and I'm not some Edward Heath/Mark Two, filled with bitterness. I'm merely taking the opportunity - which I haven't had for fourteen years - to say what I feel about certain issues. And, I think, it would be wholly wrong and wholly unworthy of a Member of Parliament, if I didn't do that. But, that doesn't mean I'm getting at anybody. HUMPHRYS: You said you can't envisage the circumstances in which you might run. Everybody will remember that Michael Heseltine said exactly that. And then of course he said the circumstances changed because he'd reached the conclusion, as did many others, that if Margaret Thatcher were to lead the Party into the next Election, you'd lose it, therefore he felt he ought to mount his challenge. LAMONT: Well, this is Sunday and I've said I have no intention and that is what I mean. HUMPHRYS: But, might that change if, during the next few days, they come to you and say: Norman, we need you? LAMONT: I'm not wanting to get involved in this and I do not think there will be a Leadership Election. HUMPHRYS: That doesn't quite - with respect - answer the question. LAMONT: I think, that answers it completely and totally. I think, it wholly answers it and I came here to talk about the Budget. HUMPHRYS: No. I will, indeed. LAMONT: I absolutely understood that you would have to ask questions about matters which I was slightly surprised to see in the papers this morning - as no doubt you were - but I've long ago learned the only true things in the newspapers are the advertisements. HUMPHRYS: Indeed, I'm grateful to you for talking about this when, indeed, we asked you to talk about the Budget. But, let me just persist with this for just a moment more, if I may and ask you that question again because I'm not quite clear that your answer was absolutely: I will not. Even, if they approach me, during the next few days, I will have nothing to do with the Leadership bid whatsoever. LAMONT: I have firmly said: I have no plans and intention and that is that. HUMPHRYS: But, that could change, if they come to you? LAMONT: I have said that I can't see circumstances, I can't see why that would change. I do not wish to be involved in this. HUMPHRYS: Why do you think it is then? LAMONT: That this has happened? HUMPHRYS: Well, I was going to say: a) that this has happened but, also, that the Government seems to be going out of its way to belittle you. LAMONT: Well, I don't know if the Government's going out of its way. HUMPHRYS: Well, we heard Norman.... we heard the Home Secretary this morning talking about how you'd cut a ridiculous figure if you ran. They've been digging out quotes, supplying the newspapers with them about.... LAMONT: Well.... HUMPHRYS: ...things you'd said about Mr Major after Edinburgh. There seems to be some fear that you're going to do something to them. LAMONT: Well, there seems to have been a misunderstanding that I was going to vote against the European Finance Bill. I do not know why that could possibly have arisen because I have said, time after time again, that it would be ridiculous if I voted against that because I was associated with it. It doesn't mean that I approve of our having to pay such huge sums of money but from where we start, I believe that that Bill got us the best deal we could and I obviously will support it. Any suggestion that I was going to do otherwise was obviously quite wrong and privately and pubicly I've always made that crystal clear to anyone who has asked me. Why has all this arisen? I've been asking myself that this morning. I think, the reason it has arisen, frankly, is simply because the Government has got itself in a bit of a hole-in-a-mess this week and there are a lot of very angry people as a result of the tactics that have been adopted on the European Finance Bill. They don't like it and they have been running around and, I think, thinking of ways in which they can vent their frustration and anger. HUMPHRYS: Does that explain why, a man whom you describe as your friend, Michael Howard, said this morning, as I say that you'd cut a ridiculous figure if you ran for the leadership? That's not very friendly. LAMONT: Well I think he was referring actually to the European Finance Bill. HUMPHRYS: I don't think he was, I think he was referering to the leadership. LAMONT: Well I haven't actually seen the interview, what he said about the European Finance Bill in turn was obviously inappropriate 'cause the question hasn't arisen. HUMPHRYS: Indeed, but he was referring to...he was asked about your possibly running for the leadership, and it was in response to that question. LAMONT: Well I wouldn't expect Michael Howard other than to defend the Prkme Minister extremely strongly. HUMPHRYS: And attack you? LAMONT: That is his job. I would expect him to be very against a leadership election taking place. HUMPHRYS: He's against you personally. LAMONT: Well I don't think you'll manage to get a quarrel between Michael Howard and myself however hard you try. HUMPHRYS: But he started it. LAMONT: Well he didn't really, I don't think. HUMPHRYS: So you clearly don't approve of Mr. Major's tactics over Europe, the way he's handled this vote tomorrow. LAMONT: Well I understand that this Bill has to be got through, I understand that. I think there is a danger obviously, in using the tactic of making it into an issue of confidence. First of all I think there is a constitutional question as to how often you can do this. You can't go on all the time saying we're going to make measures an issue of confidence. HUMPHRYS: You can't keep playing the same card? LAMONT: Right, but the second point that I think is more important really, is that I actually think the Bill would have got through the House anyway. I think it would have been quite difficult for the Labour Party to have framed an amendment that Conservative rebels could have sided with, and I think they would have been quite careful about doing that. I think what may have led to the decision was simply the fear that the rebels would have dug in, that you would have had a lot a filibustering and therefore you had to get the Bill as quickly as possible, but on the whole I think the headlines we've had this week could hardly have been worse and I would have preferred to have attempted to do it without these tactics. HUMPHRYS: You've said there was a danger that these tactics could inflict long term damage on the party. What did you mean by long term damage? LAMONT: Well, I meant that a lot of people resented it, and Europe is an extremely important issue, it is THE issue in the Conservative Party, the centre of gravity of the Conservative Party in the country and on the backbenches, is very much to the Right of that of the Cabinet on this issue, and I think you have to take that into account. In my opinion the backbenchers are absolutely right. HUMPHRYS: So all of this has made it more difficult for Mr. Major to lead a united party into the next election hasn't it? LAMONT: Yes, he has a very difficult job because this is a very divisive and very difficult issue. HUMPHRYS: What ought he now to do then? LAMONT: Well I myself would like him to say that we won't participate in a single currency. I entirely supported the attitude obviously, that we took at Maastricht, but all that did was to defer the decision, time is ticking by and it's not that far away now from 1996. We can't just wait until the evening of 1996, I think perhaps the government ought to publish a White Paper on what is going to come out of 1996, I certainly think we ought to reject a single currency, I also believe that we ought to have an undertaking, to have a referendum on either the outcome of the next IGC, or any decision to move to a single currency. A referendum in my opinion, is absolutely inevitable, I think Blair will announce the Labour Party are going to have one, will commit themselves to one, we will be forced to follow, I think it's extremely short sighted not to do so in advance of the Labour Party. HUMPHRYS: And if he doesn't do those things? LAMONT: Well, I think that's merely my advice, if he doesn't do those things life will go on, but I think there will be growing support for those things. HUMPHRYS: And the implication of that is what, because he has a very small majority of course? LAMONT: Well, there isn't going to be a lot of European legislation after this week, there will be minor pieces of European legislation, but I'm quite sure the government will get its majority. I think the European issue will then move away from the front, but then it will loom again as we move towards 1996, and there will be a big debate in the Conservative Party about it. HUMPHRYS: An acrimonious debate, a very divisive debate? LAMONT: Well let us hope it will be as constructive as possible. HUMPHRYS: Alright, let's look at the other problem that is bedevilling the government, and that's obviously the economy. Everybody says on the face of it the economy is doing very well but it isn't delivering the voters, at least our focus group said so then, John Maples himself believes it isn't, so what has Mr. Clarke to do in his Budget on Tuesday, to bring those voters back. Let's deal first if I may with whether he should cancel or postpone the second tranche of VAT on fuel. LAMONT: Well, I don't think a government can conjure up the "feelgood" factor. It is something psychological, it is indeed puzzling that there isn't a greater feeling of good in the economy, because undoubtedly the statistics are very very good, the economy is growing rapidly, probably as rapidly as any in the western world. I say western world, unfortunately in times...growing as fast as any economy in the world, I think that's a little bit of an exaggeration, inflation is down, above all government borrowing is coming down. So, there has very rarely been so much good news. Why does this not percolate through to the public. I think there are several reasons. Firstly, the memory of the recession is quite recent, so time will cure some of it. Secondly, I think the fact that inflation is so very very low, a lot of people actually rather like the world where their pay-packets go up in nominal terms even if they're not actually really any better off. So I think that is another factor. I don't think that there is an enormous amount you can do just in a budget to alter this. I think an appearance of steadiness, of underlining the good news and letting time pass. I believe eventually it will come through. Above all, what the government has got to give is an impression of steadiness and confidence. And one reason why the "feelgood" factor might not come through is because people have other adverse views about the government and the government must appear steady, to have objectives, to have a purpose, to have a philosophy. HUMPHRYS: But one thing they could do, to please a great many people, as we've been hearing over and over again, and apparently Mr Major has been urged that this ought to happen, by all sorts of senior people in the party, quite apart from outside, is this question of the second tranche of VAT on fuel - dump that. LAMONT: Well, senior people in the party are always urging things like this. You make difficult decisions, they always want to run away from them. I believe that that would be a mistake, I'll probably en up being the last man in England in favour of the second stage of VAT on fuel and power, but we've had so much of the unpopularity for this, I think not to go through with it now, and quite frankly when it is through I think it will be quite quickly forgotten. The reason that I think we ought to go through with it, is simply this: that we have to get borrowing down and as Edwina Currie said, the question is can we afford it? The people in your programme were saying they wanted more on the Health Service, more on education, we must get borrowing down. We can't just, because we have some figures coming through that look reasonably good, immediately give it back to the people. Let's get the borrowing down, amd THEN look for tax cuts and income tax cuts ought to be the priority. HUMPHRYS: But there is a danger here again, isn't there, if it becomes a matter of confidence in the government, you heard two backbench MPs there saying they wouldn't support it. And you won't get the Ulster Unionists with you on this one this time. LAMONT: Well I think Conservative backbenchers ought to and I suspect that when the moment comes they will. And I certainly hope that we will see the same strong arm tactics the whips have employed on other measures employed on this, be good to back a few Conservative measures. HUMPHRYS: What, do you mean threatening to withdraw the whip and threatening their constituencies with dissolution if they.. it's a bit heavy handed...you can't keep doing this can you. LAMONT: I quite agree, you can't keep doing this but all I'm saying is that I do believe that Conservative backbenchers ought to support this. I will be surprised if Kenneth Clarke drops it. HUMPHRYS: And if he does it will be a sign that they've lost their nerve as far as you're concerned? LAMONT: Well I won't say a word if they drop it. HUMPHRYS: Alright, something else the voters are telling you, very clearly, again from our focus group and all sorts of other areas, is that they don't want cuts in public spending on things like health and education and wealth. But you're saying that Mr Major MUST, Mr Major and Mr Clarke MUST make big reductions in public spending, that is vital. LAMONT: Well when you say I am, what I have said in comments I've made in advance of the budget, is that lower inflation means that you can cut the amounts of money that have been allocated to programmes without in any way effecting what those programmes deliver. HUMPHRYS: But you want it to go deeper than that, don't you. You're not satisfied with trimming, at this stage, you're not satisfied with saying, as I understand it, with saying, let's hold it at this level, you're saying we've actually got to.... LAMONT: I think the longterm objective of the government is to reduce the proportion of the economy that is taken by the state, I think that philosophically is what the Conservative Party ought to be about. In this immediate budget, I think the priority ought to be to get about five or six billion pounds, say six, I think it ought to be six, off the new control total. Even doing that, there's no reason why that should effect the volume of goods that the public service purchases or provides, that is merely a reflection of the improving situation in our public finances and above all of lower inflation. But you must adjust these figures down, for lower inflation, you're not being tough simply by knocking five or six... HUMPHRYS: But in the longer term you're saying there have to be cuts in the amount the government takes out of our pockets, otherwise there's going to be trouble, as far as you're concerned. And that, as you know as a politician, is going to make the government even more unpopular. LAMONT: I'm sure the Government will - let's just be clear about this - I'm sure the Government will go on improving, as it has done, ever since 1979 - the Health Service and the Education Service, where there have been no cuts. Cuts just means not as big an increase as people want to have. What I believe ought to happen in the medium term is that the proportion of the economy that is taken care of by the State ought to diminish and I believe we ought to take less out of people's pockets. HUMPHRYS: But..and you're saying that that ought to be done, even if it makes the Government less popular. LAMONT: Well, I certainly wouldn't advocate anything that I thought would make the Government less popular. I believe.. HUMPHRYS: That's not very courageous, is it? LAMONT: I believe that this is what people want and I believe that it is... HUMPHRYS: It's not what they're telling us? LAMONT: We've won elections on this platform. It was how we won elections throughout the 1980s. You can do this and have strong, improving Health Services and Education Services at the same time. But, I believe, the priority ought to be to reduce the rate of Income Tax and we ought to ensure that public spending is adjusted to bring that about. HUMPHRYS: And, the fact is that real takehome pay is falling again this year. We learned this again. If we needed to learn it again, from the Maples Letter, it will fall up to '96, he said. We have to see this rise soon and I quote from the letter: "or we'll have had four or five years of recovery, with no rise in living standards". Now, no Government is going to be returned to power in that eventuality, is it? LAMONT: Well, I'm not sure that I accept that disposable income will not rise before 1996. In fact, I don't accept it. I think, you will see... HUMPHRYS: So, Maples has got it wrong? LAMONT: I think, the Maples Memorandum is not correct, in that respect. And, don't forget, there have been, since two or three years ago, there have been some dramatic falls in interest rates. That, even if people's money incomes from work have not been increasing very dramatically, people with mortgages have had more money left in their pay packets after the deduction of mortgage interest, because that has come down so sharply. As was brought out in your film. HUMPHRYS: You'd like to see interest rates go back up? LAMONT: I think, interest rates will, inevitably, go up a little in the next year. HUMPHRYS: Now, these - the sorts of things you're talking about - are difficult decisions and you have said, in the past, that when Mr Major takes decisions politics are too dominant. There is a reluctance on his part you've said for him to take political...difficult decisions for political reasons. How can you be so certain in the face of all this, the kinds of things you've been talking about this morning, that he is going to lead the Party into the next Election? LAMONT: Well, I think - I'm sorry I thought you were about to ask me whether he would do these things. I don't think there'll be a leadership election. So, the question doesn't arise. I think, the Government has shown signs of being prepared to take tough decisions of the kind you are describing which I've been advocating. I strongly supported, for example, Kenneth Clarke's decision to put up interest rates in advance of the signals from money supply and markets telling him it was necessary. I thought that was a good indicator. HUMPHRYS: Norman Lamont, thank you very much for joining us. ...oooOooo...