Murnagan 26.02.12 Interview with George Osborne, Chancellor of the Exchequer
ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS
DERMOT MURNAGHAN: Now then, with less than a month to go to the Budget, Chancellor George Osborne is facing pressure from all sides to deliver a plan that will ease the burden on struggling families and help the economy to grow, but as the eurozone crisis and tensions in the Middle East cast a shadow over the recovery, the question is will he manage it? Well in a moment we’ll be hearing from the Chancellor but also watching the interview are our Twitter commentators today, Vincent Moss, Sunday Mirror’s political editor, the Spectator’s Pete Hoskin and Allister Heath, editor of City AM. They provide their reactions via Twitter which you can read on the side panels and you can follow on our website, skynew.com/politics and we want you to join in using the hashtag #murnaghan. Well the Chancellor is currently at the G20 finance minister’s summit in Mexico where the eurozone crisis looms large and I spoke to him earlier and began by asking if he agreed with the American view that the G20 shouldn’t put up more money to help the eurozone until its members decide how much to contribute themselves.
GEORGE OSBORNE: Yes, is the short answer. It is very much the British view as well. We are prepared to consider IMF resources but only once we see the colour of the eurozone money and we have not seen the colour of the eurozone money so whilst this G20 conference I think has a lot of important things to discuss and we will talk about IMF resourcing, I don't think you’re going to see any additional IMF resources committed here because quite frankly the eurozone have not committed additional resources themselves and I think that quid pro quo will be clearly established here in Mexico City.
DERMOT MURNAGHAN: Beyond the eurozone, what do you identify as the big threats to global growth? One eye I suspect on the oil price, the increase in oil price with tensions increasing in the Middle East, Iran and Syria?
GEORGE OSBORNE: Well I think those are all sources for concern, not just the humanitarian situation in Syria, not just our concern about Iran getting a nuclear weapon but also the economic impact, particularly of the tension in Iran that has already led to an increase in the oil price recently and that is something of course that would impact every economy in the world including Britain. I wouldn’t dismiss out of hand the other concerns we have. I mean the eurozone crisis, whilst it has abated somewhat and the Greek package agreed last week was welcome, remains probably the biggest source of global instability and is probably going to be the centrepiece of these G20 discussions which are just beginning today. And also those countries with high budget deficits like Britain and America are clearly under pressure to reduce those deficits and that is precisely what the British government is doing at home.
DERMOT MURNAGHAN: So with the rising oil price in mind, when the Budget is delivered in three and a half weeks’ time, are you listening to any of the voices that say you should do something about fuel duty?
GEORGE OSBORNE: Well I’ve taken action in the last two fiscal statements, in other words the Budget and my autumn statement, to either avoid a fuel duty increase that was coming or indeed in the Budget last year to cut fuel duty, so fuel duty is six pence lower today than it would otherwise have been so I have absolutely shown a willingness to respond to the international situation and we have taken action this year. I’m not going to talk about the Budget, tempting as I know it is, because that’s several weeks away but I have taken action already this year to avoid increases in fuel duty which were planned by the last Labour government and that involved committing several billion pounds of resources, it has involved putting a tax on oil companies instead of families and motorists and businesses, precisely to ameliorate the impact of these high world oil prices on the British public.
DERMOT MURNAGHAN: One man in government who has talked in advance about the Budget, somewhat unusually, is the Deputy Prime Minister Nick Clegg, who said some weeks ago that he feels that the budget priority should be tax cuts for low earners. Are you giving him a sympathetic hearing as he pushes the case to move more quickly to that ambition of taking anyone earning less than £10,000 out of tax altogether?
GEORGE OSBORNE: Well obviously I listen always very seriously and carefully to the Deputy Prime Minister and our coalition partners and we are a coalition and the Budget will be a coalition Budget when it comes. We are committed in the coalition agreement to a real increase in the personal allowance each and every year and what that means for people watching this is that we in effect cut people’s income tax, meaning you can earn more tax free. We are taking over a million people out of tax altogether with the action we’ve already taken, those on low incomes. So I listen very carefully to what he says, I mean he knows as I do, as the country knows, that any tax cut would have to be paid for. In other words there would have to be a tax rise somewhere else or a spending reduction, in other words what we are not going to do in this budget is borrow more money to either increase spending or cut taxes. We can’t have any deficit finance measures in that sense because getting the budget deficit down, which is now happening, is an incredibly important part of keeping interest rates low in Britain, keeping confidence in the British economy, keeping economic stability in Britain so no deficit finance measures in the Budget, everything we announce is going to have to be paid for by some other measure.
DERMOT MURNAGHAN: Well you talk about that balancing and much of that, I suppose the philosophical talk around the budget is moving to more taxes on wealth rather than income, in which case you could have a meeting of minds with the Liberal Democrats and their ambition to bring in something like a mansion tax or increase the number of council tax bands.
GEORGE OSBORNE: Well the Liberal Democrat ambition for a Mansion Tax is well known, they have certainly made no secret of it, it was in their election manifesto and issues like council tax bands have come before, certainly have come up before the last two budgets and I’m not going to comment on the speculation, just as I didn’t back then because it’s a slippery slope once you start commenting on individual budget stories when you are preparing a budget but, you know, as I’ve said, we’ve already taken measures to make sure the tax system is fairer, I increased Capital Gains Tax for wealthier people in my first budget and I have taken action on Stamp Duty avoidance and that’s something we are definitely looking very closely at now. These are wealthy people who just avoid Stamp Duty when they buy and sell a home, that’s something I’ve made very clear is unacceptable.
DERMOT MURNAGHAN: I talked about the philosophy surrounding the budget, obviously not the measures themselves, but I’m sure you agree that higher taxes don’t necessarily bring in higher tax revenues for the Exchequer and with that in mind, and some of the data that you’re now getting, do you still believe that the 50 pence tax rate should stay for the time being?
GEORGE OSBORNE: Well we’ve only just recently got the tax returns in from the first year of the 50p tax rate, it was introduced in April 2010 by the last Labour government and people have only sent their tax returns in for the 2010/11 year at the end of January so we’re in February, we’re assessing those tax returns. I have committed at the Budget to publish an Inland Revenue study of how much money the 50p is actually raising, whether it raises what the Labour government, the last Labour government said it was going to raise. Again I’m afraid you are going to have to wait for that study to be produced and it’s not completed so I couldn’t actually today give you the final results of that study because, as I say, literally in the last couple of weeks we’ve got all these thousands of tax returns in and we are currently analysing them. Don’t worry, I will tell Sky not quite first but Sky will be among the first to hear the news when we have the results.
DERMOT MURNAGHAN: Glad to know that’s a promise. Can I turn to some of the buzz surrounding you there now with your international colleagues, the finance ministers and the central bankers. Do you get any of them saying to you, have they been saying is Britain turning anti-business now given what they must be reading and hearing about some of the anti-business rhetoric that’s taking place here?
GEORGE OSBORNE: Well I think some of the issues that feature in the British political debate, quite frankly they feature in the American political debate, they feature in the French presidential election at the moment and so I think that all Western countries have got to be careful not to create an anti-business culture. Of course people are angry about what happened three or four years ago with the banks and that’s perfectly understandable but we mustn’t let that spill into an anti-business culture in Britain, we mustn’t let the anger at what happened at the Royal Bank of Scotland four or five years ago colour what we need to do to the Royal Bank of Scotland today and we certainly mustn’t allow those in British politics who frankly never trusted business, to get the upper hand because the British economy needs business to invest, needs business to create jobs. The British government has run out of money because all the money was spent in the good years, the money and the investment and the jobs needs to come from the private sector. It is coming and we are taking measures like cutting business tax in Britain which everyone round the world, including here at the G20, have noticed and have made Britain an attractive home for investment. Before coming here I was just in Texas, there are Texan companies that want to invest in Britain, so there is good news but we mustn’t let that news be ruined by an anti-business culture emerging in Britain and I can assure you that myself, David Cameron and the government are going to do everything we can to resist it and to create a pro-business culture in Britain.
DERMOT MURNAGHAN: Well we’re going to pause there for a moment. Coming up, what the Chancellor really thinks about the health reforms that are causing the government so much grief, stay with us
DERMOT MURNAGHAN: Welcome back and let’s continue with our interview with the Chancellor, George Osborne who I spoke to earlier from Mexico. Now I asked him whether he thought it was right that big bonuses are still being paid at banks that the taxpayer owns a large stake in?
GEORGE OSBORNE: The bonuses have come down pretty dramatically at the Royal Bank of Scotland, they are much less than they were three or four years ago and they are pretty much, well they are less than half what they were a year ago so they have come down and that reflects the fact that the bank made a loss. But let’s be clear, the people who are currently running the Royal Bank of Scotland were not the people in charge when the bank blew up, that was Fred Goodwin and that was a regulatory regime presided over by the previous government. Now what this government is interested in is a new management team sorting out the problems of the Royal Bank of the Scotland and the reason that’s important is a) we need a Royal Bank of Scotland and indeed this would also apply to Lloyds, that are out there confidently lending in the economy and above all, the people watching this programme want their money back. The British taxpayer put many tens of billions of pounds into these banks and we need the new management to sort out these problems. Their bonuses, as I say, are much less than they were and they are indeed back markers in that industry, even if you take the view that the whole industry probably pays itself too much, the Royal Bank of Scotland is a back marker and I think that’s appropriate.
DERMOT MURNAGHAN: As you say there, Mr Hester, it wasn’t on his watch when RBS hit the buffers, he is trying as hard as he can, why doesn’t he deserve his full bonus?
GEORGE OSBORNE: Well he has got a very difficult job to do, one of the most difficult jobs in British finance. He is in an industry that has the pay and the bonuses that we are all very aware of as a country. As I say, I think it’s appropriate that the Royal Bank of Scotland bonuses are less than other banks and of course Mr Hester himself has waived his bonus but let’s be clear, our interest as a country is not just Mr Hester’s bonus, our interest is Mr Hester doing his job and we’re talking about bonuses of yes, hundreds of thousands of pounds and maybe even if you add them all together millions of pounds and I can understand why people see those as very large sums of money but let’s compare it to the many billions of pounds that were invested in the Royal Bank of Scotland by the British taxpayer – I say invested, it was put in in an emergency – and I am very happy to have this debate on the media about those bonuses any time but what I don’t hear such a discussion about on the media is how important it is that we get the Royal Bank of Scotland back on its feet lending, not such a risk to the British economy and frankly, Stephen Hester and his management team have done a pretty good job so far in reducing the risk to the British economy of the Royal Bank of Scotland and getting that bank out there into the economy doing the job we want it to do.
DERMOT MURNAGHAN: Have you had any discussions with your Argentinian counterparts there at the G20 about the Falklands and the rising tensions there?
GEORGE OSBORNE: No, I haven’t had those discussions. I think the Argentinians know exactly where we stand on the sovereignty of the Falkland Islands but I haven’t actually yet met my Argentinian counterparts so if they raise it I will let you know but they will get a pretty clear and robust answer from me.
DERMOT MURNAGHAN: Do you think Mr Lansley, the Health Secretary, has messed up the design and the delivery of the Health Bill?
GEORGE OSBORNE: Well no, I’ve seen those reports, they’re not true. I absolutely believe we need to see the National Health Service Bill through and I think Andrew Lansley is doing an excellent job as Health Secretary. Let’s be clear, the reason why we need to see this reform of the NHS is because we are absolutely committed to an NHS that’s free at the point of use for people but as the society ages, as we live longer, we have got to have an NHS that can afford new treatments and that’s an NHS that offers choice, that brings in different providers. Reform is always difficult and you see that here at the G20, there are other countries trying to undertake difficult reforms but in Britain, whether it is education reform, pension reform, health reform, we are doing these things to improve public services and to do so in an environment in which the state does not have an unlimited amount of money so we are absolutely going to proceed with the health reforms because it is all about making the nation healthier and protecting and safeguarding our NHS for the future.
DERMOT MURNAGHAN: Wouldn’t an independent Scotland actually benefit the Conservative Party in that it would make it much more likely that you’d be able to govern with a majority?
GEORGE OSBORNE: Well look, I’m very clear that Britain benefits and the United Kingdom benefits from having Scotland as part of it and, as David Cameron made very clear in his recent visit to Scotland, we’re offering a very positive argument about the benefits to Scotland, the benefits to the rest of the UK about staying in Britain. I think frankly the Scottish Nationalist Party for the first time in a while are on the back foot because they are having to explain why they don’t want the simple yes/no referendum question – should Scotland be part of the UK or not? – and that has meant that they are in the difficult position of having to explain, well maybe they want a multi-choice question and I think that’s smoked them out a bit and it’s clear that the SNP I think realised that Scotland does not want to leave the United Kingdom. I would like to clear up the uncertainty which frankly I think causes some uncertainty in the economy as well when it comes to companies investing in Scotland, I’d like to clear up that uncertainty, let’s have that referendum, let’s make it a simple yes/no question that everyone can understand, that resolves the matter. I think if we put that question to people we can be pretty confident that people will vote to stay in the United Kingdom but let’s have the argument and now that the SNP are on the back foot a bit I think that is quite revealing about their confidence in making their argument.
DERMOT MURNAGHAN: But isn’t there a rather intriguing prospect for Conservatives that an independent Scotland, presumably not sending MPs to Westminster, would make a Conservative majority much more likely?
GEORGE OSBORNE: Well that’s not how we think about it. David Cameron, myself, other senior Conservatives, are absolutely committed to keeping the United Kingdom together and the solution to the problem of the Conservative party not having enough seats in Scotland is to increase the number of Conservative MPs in Scotland which is something we are working very hard on.
DERMOT MURNAGHAN: Don’t you think it’s about time, when you are talking about cutting unfair subsidies, we’ve been hearing last week about the subsidies that mean that booze, that beer, wine and spirits are an awful lot cheaper in the House of Commons than they are elsewhere, they are still subsidised and some rather unsavoury incidents resulting. Don’t you think it’s about time that perk was cut?
GEORGE OSBORNE: Well we have actually cut the subsidy for catering in the House of Commons but to be absolutely honest with you, it’s not my own central issue at the moment. I leave that … there are no doubt very important discussions taking place on the House of Commons catering committee about these issues and I will get on with international financial matters here at the G20 without the drinks you get in the Stranger’s Bar.
DERMOT MURNAGHAN: The Chancellor there in Mexico on everything from the IMF to the House of Commons catering committee.