................................................................................ ON THE RECORD BRIAN MAWHINNEY INTERVIEW RECORDED FROM TRANSMISSION BBC-1 DATE: 3.12.95
................................................................................ JOHN HUMPHRYS: Dr Mawhinney, the Budget hasn't done enough to reverse your party's fortunes has it? BRIAN MAWHINNEY MP: At the moment what has happened is that Ken Clarke has made a statement. He has set out what is going to happen in the terms of the next financial year, as far as tax is concerned, as far as economic growth is concerned. All of those proposals are going to work their way through into people's lives and experiences and pay packets. But at the moment, we're what, three days after a statement. HUMPHRYS: But the signs are that people are going to be disappointed when all that's been worked out isn't it? MAWHINNEY: Well this is what I have dubbed a nine pound a week Budget. The average family, on average earnings, next year, is going to be nine pounds a week more in terms of their spending. I don't think people are going to be disappointed by that. And incidentally, the first concrete reaction to the Budget happened the very next day when a lot of Building Societies reduced their mortgage rates, that's good news too isn't it. HUMPHRYS: Well let's come back to those two points in a moment if I may. But expectations were raised that much more was going to happen than actually did happen and those expectations have been disappointed. MAWHINNEY: Some of those expectations were frankly silly John. I heard somebody on the BBC talking about the possibility of a four pence cut in direct tax. What they didn't talk about, what would have been...how that might have been funded or what would have been the consequences on the markets or the interest rates if that had been done. So certainly there was a certain amount of increased anticipation/expectation, some of it frankly wild. What we got was a Budget in terms of the expectations which had accumulated about ...the equivalent of two pence in direct tax or one pence taken directly and about one pence worth of changes to the twenty p band and thresholds, all of which were focussed to be of major help to those on lower incomes. HUMPHRYS: But part of the job of party management, of your job if you like, is to manage expectations. And if those expectations get out of hand, partly because of what your own people, on the Right-wing of the party maybe have been doing and saying, that's down to you isn't it? MAWHINNEY: Well clearly there is a management issue. I don't shirk that responsibility nor do my colleagues in government. On the other hand, both of us are aware that the idea that politicians, even senior politicians, can manage the media and some of the expectations that it chooses to carry forward is not the real world John. HUMPHRYS: No but media is fed by politicians isn't it? MAWHINNEY: Well, I don't know that it is frankly. To a certain extent of course the media reflects what politicians tell them but the media also speculates on its own behalf and might even occasionally, John,
go out to find people who'll say what the media would then be quite happy to re-print. HUMPHRYS: Well let's look at the political reaction, or the reaction to the Budget thus far. And I know we're only a few days in but nonetheless you'll have seen the poll that was published this morning in the Sunday Times, pretty devastating response wasn't it? MAWHINNEY: But I come back to the point that I made at the beginning. What we've had is a Budget statement. We haven't even finished the Budget debate yet. So it would be difficult wouldn't it to expect people who thus far after three days haven't had any change in their personal circumstances as a result of the Budget statement, would be premature to expect them to be reacting in the sort of way that you are implying. I have no doubt that as the consequences of the continued real economic growth, the Budget changes, as those make their way through into pay packets next year. Remember the average family, on average earnings will be nine pounds a week better off, that people will then see the effect of the Budget, not in terms of what they read in the newspapers or hear on television but in their own personal experience. HUMPHRYS: I take that point and say I want to come back to the nine pounds but I'm talking about sophisticated people as well, your own MPs, people like Rhodes Boyson and David Evans who know how many beans make five because they understand how it works. They're disappointed and they're prepared to go on the record to say so because of the effect it is going to have with the grassroots of your party or rather the effect it is not going to have with them. MAWHINNEY: But John do you want a list, the tens after tens after tens of MPs who said exactly the opposite. I mean what is interesting in these discussions, you and I have had this exchange before is that if you pick one or two people who have expressed some element of disappointment... HUMPHRYS: Sure because the party is meant to be united. MAWHINNEY: That's a matter for them. But you will also know that the overwhelming majority of the party welcomed the Budget, they welcomed it as a sensible Budget, as a commonsense Budget, as a responsible Budget and as a Budget whose consequences were going to benefit a wide range of people in the community and particularly those on lower incomes. HUMPHRYS: Alright well let's look if I may then at some of those benefits that you suggest and the reasons why when people realise what has happened they will be pleased and why I'm suggesting to you the exact opposite that they will be disappointed. Let's look at education first. Now expectations have been raised here, you have told local authorities that they should spend another four point five per cent, that they ought to expect to spend another four point five per cent because that's what's needed. However, however, all you have given them is another three point one per cent. How are they going to do it, they can do it only one of two ways - they can either cut other things or they can push up Council Taxe, now that's going to disappoint people when they realise what's going on there. MAWHINNEY: Let me start with education. You and others over the last twelve months have been saying: "the people out there want more money spent on education and you the government don't listen". Now, what we've done is we've set aside about eight hundred and eighty million pounds extra to be spent on education. That's a very considerable sum of money. I have just written to constituents in Cambridgeshire saying that's about four point nine per cent increase in the education Budget for next year. So what we did was we listened precisely to what the people and broadcasters like you were telling us needed to be done and we've set aside that money to be focussed on education and I hope that the local education authorities will also respond to what parents and teachers and governors have been saying and see that that extra money is channelled through to schools. HUMPHRYS: Yes but it isn't actually four point nine, what it is is three point one per cent of the total education spend. There isn't enough money. The figure that you've just given me is only three point one per cent of the total amount that's going to be spent on schools - teachers, buildings, teachers' pay rises and all the rest of it. So they are going to be disappointed when they actually do the sums and discover they haven't got enough. MAWHINNEY: Well, I maintain that you already appear to have done sums which I don't recognise.. HUMPHRYS: Not me, other people.. MAWHINNEY: ...I come to a judgment on behalf of the nation before either local authorities, or local education authorities have had the opportunity to even start to look at the amounts of money that they've got and the consequences of those; much less the schools, much less the parents and the teachers and the governors. Now, frankly, if that's the position you want to adopt, John, that's a matter for you. I have no comment on that but I have to say that the rest of the people in the country will say eight hundred and eighty million pounds more for Education, for schools in particular. That's a direct response by a Government that recognised that parents and teachers and governors had set a priority on a good funding arrangement for schools next year and I think they're going to welcome that, providing of course, that the local education authorities pass on that money to schools and I very much hope that they will. HUMPHRYS: Ah, well, provided they pass on that money to schools and there's the rub, isn't it? MAWHINNEY: Well, you say there's the rub. That's the system which we have, John, we have it for many years now in place. We've had other conversations in which you accuse this government of centralising but this government does, as its predecessors have done, is to make money available to local authorities. They, ultimately, have to make judgments about how that money is distributed but as they have been at the forefront of saying that they wanted more money available for schools. Presumably, now that they've got eight hundred and eighty million pounds more for schools they'll channel that money through to schools. HUMPHRYS: Ah, but it's not just about passing it on, is it? It's about topping it up. I mean, we're talking about another eighty-seven thousand pupils next year, for instance. MAWHINNEY: And, all of that is covered in the extra money that has been made available by John Gummer and Gillian Shephard. HUMPHRYS: So, as far as you're concerned, there's absolutely no problem for the local authorities here? MAWHINNEY: Local authorities have to make their own judgments. That's part of our constitutional system. I believe I'm right in saying that the local authorities, generally, which includes the local education authorities made it clear to the Secretary of State that they could envisage at least one per cent of efficiency savings next year. And, when Central Government is going through a focus on trying to deliver services as efficiently as possible and trying to reduce waste to an absolute minimum, then, it seems to me perfectly sensible that local authorities should follow the same sort of general direction. So, the idea that there isn't an opportunity for local authoritites to focus on efficiency, to look at the delivery of their services and wonder whether in some cases, they might be delivered better and more effectively and more efficiently and more in terms of value for money by the private sector, rather than the local authorities themselves. All of these are ongoing issues on which the local authorities have to focus. But, they've had a settlement which you said three point one per cent - my memory is three point three but we won't quibble over a small percentage difference. But, there is money there to be spent on local services and I hope it'll be spent efficiently. HUMPHRYS: Let's move on to another area where people have been disappointed and that is Housing. They thought the Chancellor would do something to give the Housing market that boost that it manifestly needs - he didn't. MAWHINNEY: Well, you say he didn't but twenty-four hours after he sat down most of the big building societies in this country cut their mortgage rate. HUMPHRYS: And, the reason they did that is because they've got vast amounts of receipts coming in and money that isn't going out. MAWHINNEY: Well, that's what you say. I'm not entirely sure that that's what the commentators said. As I recall, what the commentators were saying in explaining this decision was that they had taken a view and I stress that they take the view - it's not me that's speaking - that the prospect for interest rates, in their judgment was such that they would want now to offer a second mortgage reduction in the space of just a few months. HUMPHRYS: So, the revival of the Housing market, then, rests entirely on the shoulders of the building societies interest rates cuts, in other words? MAWHINNEY: What the Housing market depends upon is the state of the economy and people's confidence in that economy. What we've got is an economy that's growing faster than any other European economy, has been praised by the OECD, is going to be growing by two and three-quarter per cent this year, in real terms; about three per cent next year. HUMPHRYS: Perhaps. MAWHINNEY: Well, that's the Chancellor's judgement and unless you've got a better judgement, I'll stick with that. HUMPHRYS: You've been wrong, in the past. But, anyway. MAWHINNEY: And, that economic growth, that real growth helps to generate the sort of confidence which I believe is going to see the Housing market move. HUMPHRYS: Well, then, why haven't we seen it move already? MAWHINNEY: Of course, John. HUMPHRYS: You've been telling me now for some years how the economy has been doing terribly well and prosperity is around the corner - if, indeed, not already here. And, yet, the Housing market is stuck solid. Now, you tell me that this time it is going to move. Well, why hasn't it already, if that's the case? MAWHINNEY: Well, first of all, of course the Housing market under this government has moved enormously. HUMPHRYS: Downwards. MAWHINNEY: On the contrary, on the contrary. Let's let's stick to some sort of vague hold of reality here, John. HUMPHRYS: Well I think people listening to the programme will have a hold on that. They all know what's happened to their houses. MAWHINNEY: Many, many more people today own their homes than when we were first into government in 1979, including well over - as I recall - well over a million Council tenants, who now own their own homes. And, the value of those homes has risen, in real terms, very significantly, indeed. We have been through a difficult patch, in terms of the recession and the coming out of recession. People have held back in the Housing market. Most of the commentators will tell you. So, you don't have to rely on politicians that that's a question of confidence. I think, that they're and I speak entirely personally, I think that there are just the beginning of signs that that confidence MAY be about to increase a little. I certainly hope so. I say that on the basis of anectdotal comments that are made to me and I say it's an entirely personal comment. But the reduction of mortgages twice in a few months is likely to aid that process. And, of course, the Housing market is dependant about the state of the economy but it is also dependant on the level that people believe that they will have to pay their mortgage at not only the immediate but in the medium term. HUMPHRYS: And, of course, it depends on how well off they feel in general. So, let's look at that. You twice during this discussion talked about this was the nine pounds a week Budget. People are going to be nine pounds a week better off. But, let's look at that a little bit more closely. Nine pounds a week, maybe, but not a nine pounds tax reduction of course. They're actually going to be something less than three pounds a week better off as a result of the Budget. So, that that nine pounds a week figure is terribly misleading, isn't it? MAWHINNEY: On the contrary, it's the Chancellor's figure, and he reaffirmed it in as letter to Tony Blair just at the end of last week because Tony Blair tried to make the same point that you're making. People who are watching us, John, don't look at their pay packets and say: It's gone up by this amount for this reason and that amount for that reason. They look at their pay packets and next year the average family, on average earnings, as a consequence of tax cuts and real economic growth in the economy,
reflected in Wages, in Child Benefit and the effects of adjustments for inflation, the average family on average earnings is going to be nine pounds a week better off. The actual figure in the Budget was four hundred-and-fifty pounds next year, which is about nine pounds a week. HUMPHRYS: That assumes a four per cent pay rise? MAWHINNEY: It assumes a growth in the real economy, which is reflected in wages. It's reflected in levels of inflation,which as you know are lower now than they've been for about fifty years. It reflects increases in Child Benefit; it reflects the tax changes. HUMPHRYS: Right. MAWHINNEY: And, can I say that the reason that Tony Blair doesn't like it - which is perfectly understandable - is that he doesn't want people to understand that the way we have managed the economy means that the average family next year on average earnings is going to have nine pounds a week more to spend, and that's good news for them. HUMPHRYS: Right, assuming they get that four per cent pay rise. If they don't the nine pounds a week doesn't apply clearly. MAWHINNEY: Well, I'm quoting to you the Chancellor's figures - the Chancellor's-. HUMPHRYS: I've seen them, I've read the- the tables, so I know what they mean. What I'm saying to you is if they don't get a four per cent pay rise they will not be nine pounds a week better off, will they? I mean, that's common sense isn't it? MAWHINNEY: What I'm saying to you is exactly what the Chancellor said- HUMPHRYS: Yah. MAWHINNEY: -in the Budget and I'm glad that there is no difference between us, that if you put together tax reductions, real growth in the economy, Child Benefit, the adjustments for inflation, the average family on average earnings next year will have nine pounds a week more to spend, that's got to be good news. And, they sound as if they're going to be able to spend that against a background of lower mortgages as reflected by the immediate reaction of people in the real world to Ken's Budget. HUMPHRYS: Right. So, the message from Ken then, and indeed from Brian Mawhinney this morning is: Don't settle for less than four per cent in the next pay round, because you're not going to be nine pounds a week better off if you do. MAWHINNEY: Good try, John, but you know that that's not what I'm saying. HUMPHRYS: Well, it's the logic of it. MAWHINNEY: And, you know that's not what Ken is saying. But, if that's what John Humphrys is saying people will certainly- HUMPHRYS: Yeah. John Humphrys never says anything. He merely poses questions, as you well know, and you're telling me, and you've said it about half a dozen times in this interview now, that people as a result of what's been going on, are going to be nine pounds a week better off, and what I've said to you is that is assuming they get a four per cent pay rise. So, it follows as night follows day that if they don't get the four per cent pay rise, they are not going to be nine pounds a week better off. Therefore, go for four per cent. MAWHINNEY: No, that's your-that's your interpretation. HUMPHRYS: No, no. It's not an interpretation. It's a statement of fact. MAWHINNEY: Well, let me tell you what I'm saying. What I'm saying is that if you put together the tax reductions in the Budget, if you put together the projected real economic growth next year, and the Child Benefit changes, and the adjustment for inflation, then the average family on average earnings is going to have nine pounds a week more to spend next year. And, if you'll allow me to say so, John, I think that's the message that will be of some significance to the people who are watching this programme. As I said, they're not going to be overly concerned about which bits of that come from which particular aspects of the overall equation. They will look at their pay packets and they will see a change, and as I said earlier, I think, they're going to see a change for the better in terms of the amount of money they will have to spend- HUMPHRYS: Right. So- MAWHINNEY: -and they're going to see that against a background of a lower level of mortgage as announced this week. And, that will also be of benefit to them, because as mortgages go down John they will have more money to spend. HUMPHRYS: Right, so they will disappointed then if they're not nine pounds a week better off. In other words if they don't get the four per cent increase that these figures are based on; they will also be disappointed will they not if they find that at the end of this Government's term in office they are paying more in total taxes than they were paying when this Government came in five years previously? MAWHINNEY: Well, unlike a number of people they will also understand that since the last General Election this country has been through a serious recession, as indeed have countries all around the world. And, we came out of that recession with a very large borrowing requirement. If we had done nothing about that borrowing requirement both of us know that it would have had detrimental effect working through in terms of jobs and levels of prosperity. So, we had three choices. You cut your spending, you raise your income or you do a bit of both, and we did a bit of both. People understand that. What they also understand is that neither of the other Parties has ever, ever said what they would have done to address that huge borrowing requirement had they been in Office. You will dismiss that as politicians- HUMPHRYS: No, I wouldn't dismiss it. I wouldn't dismiss anything you say, but what I would say is that you did make pledges. You know: We will cut taxes year on year. And, my question to you which you didn't with great respect answer there was: People will be disappointed will they not if they are paying more in tax at the end of your term in Office than they were at the beginning- and, I'm talking about the total tax take here. Surely the answer to that must be Yes, mustn't it? MAWHINNEY: I think, the answer to that question is that people instinctively - as the Conservative Party instinctively - want to be allowed to retain as much of their own money as possible so that they can decide for themselves how to spend it. That has always been our instinct John as you know. It has never been the instinct of the other two Parties, and it is a reflection of an instinct in the country that is widely held. HUMPHRYS: Can you go into the next election? MAWHINNEY: So, let me - give me a little space to answer your question. So, as a consequence of that, people will always be looking for levels of tax that are as low as possible - assuming, of course,
that it is prudent to have them at that level, and assuming also that the government has enough money being generated through the tax system to provide the quality public services which people also want, and to which they also attach significance. HUMPHRYS: Alright, I gave you space there. We don't have very much time left now, but in a simple straightforward reply, can you accept that people could go into the next Budget with their taxes higher than they were when you took over, and still vote for you bearing in mind the things you have told us? MAWHINNEY: Yes, I believe that-that people will understand that the instincts of the British people haven't changed over the last few years. It's increasingly clear to everybody that the instincts of this Party and this Government haven't changed, and it is becoming increasingly clear that the instincts of the Labour Party haven't changed over the last few years. It was those set of circumstances which after a lot of hard work and a lot of explaining and defending and looking to the future, won us the last four General Elections. It's going to win us the next one also. HUMPHRYS: Brian Mawhinney, thank you very much,
indeed. MAWHINNEY: Thank you. ...oooOooo...