Murnaghan 7.10.12 Interview with George Osborne, Chancellor of the Exchequer

ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Just before the last election, George Osborne reportedly told friends that within six months of becoming Chancellor he would be regarded as one of the most reviled men in Britain. Now two and a half years on the country is mired in a double-dip recession, borrowing is heading in the wrong direction and austerity remains the government’s watchword so has that prediction finally come to pass, albeit a bit late? Well joining me from the Conservative party conference in Birmingham is the Chancellor, George Osborne, a very good morning to you Mr Osborne. Did it really hit home with you just how unpopular you personally and your policies are when you were booed at the Paralympics in August?

GEORGE OSBORNE: Well you don’t do a job line mine to be popular. Indeed I think if you were a Chancellor of the Exchequer at a time like this and you were very popular then you probably wouldn’t be taking the very difficult decisions we need to take as a country to get our economy back on track. The economy is healing, a million jobs have been created in the private sector, the deficit is down by a quarter but of course it is taking longer than anyone hoped and the problems we’ve inherited run deeper than anyone feared so I completely accept that that is going to be a difficult road for the country to walk down.

DM: Yes, but being booed by a cross section of British society who were all in a pretty good mood, it really rammed it home didn’t it that they think you’re going the wrong path?

GO: Well actually I think the British people have been remarkably supportive of the very difficult decisions we’ve had to take to cut welfare benefits, to increase some taxes, to cut the size of government, to deal with our deficit, these are incredibly difficult decisions that frankly politicians often duck and the country gets into a worse mess because they do. We’ve taken on those difficult decisions and actually, as I say, when you look at the public attitude to most of those decisions they are supportive of the general direction.

DM: What about the Conservative attitude? No doubt you won’t get booed when you make your speech there tomorrow but you’ve had a much criticised budget, seen as having to make many U-turns on it, you’ve got a double dip recession of course hung around your neck and it looks as if you are going to have to abandon your debt reduction strategy, is that going to go down well?

GO: Well we are absolutely clear, Britain has got to get it budget deficit down. We have cut it by a quarter but it is still too high, it’s still higher than most European countries and that tells you something about the size of the deficit we inherited. So we have got to go on making difficult decisions and later in this Parliament we’ve got to find a further £16 billion of savings. We’ve got to do those things because we’ve got to keep our interest rates low as a country, we’ve got to show the world we can pay our way and if we weren’t to do those things, as for example the Labour party advocates, that would be a complete economic catastrophe for Britain, so we’ve got to go on doing those things and I am absolutely consistent in saying the country has lived beyond its means and has got to make savings.

DM: Are you sticking to the plan that you can see public debt being reduced by 2015/16 or, as the Governor of the Bank of England has said, it would be acceptable to miss that target given wider economic circumstances?

GO: Our progress against those targets are now measured independently by an independent body so I’m not going to be, like previous Chancellors, someone who produces figures which frankly the Treasury in the past had a temptation to fiddle. We now do that independently, we will get an assessment in December about the country’s economic prospects, its forecasts for the future, progress against things like the debt target and the fiscal mandate so we made those things, we do those things independently now. What I can be absolutely clear about is that we are absolutely committed to dealing with Britain’s debt and deficit problems and growing our economy and creating private sector jobs. Our entire economic policy is an enterprise policy and if you don’t deal with the debts then the interest rates go up, that clobbers business, it hits families and it leads to the kind of mess that frankly we inherited from the previous government.

DM: But that’s the point, you’re not dealing with the debt. We’ve put that and we heard it reiterated just there but you’re not dealing with the debt, I’m sure you’ll agree that the IMF is independent and they say you’re to miss that debt reduction target.

GO: Well look, we have cut this country’s budget deficit by a quarter. We are reducing the share of the nation’s income that the state take …

DM: Debt is still increasing.

GO: Debt has been increasing because the deficit has been very high. We are reducing the deficit. The reason why debt has been increasing is because we inherited from the last Labour government the deficit, the deficit is how much debt goes up every year and we are cutting that. We have clear plans to eliminate the budget deficit so of course you’re complete right that the country still has a huge challenge with its debt, I am more than aware of that. That is precisely why we are continuing on the path that we are continuing on.

DM: But as criticism goes, as that debt builds you don’t actually have a strategy for growth, that you can’t reduce the debt and indeed the deficit, unless you really go aggressively after growth.

GO: Okay, so the previous question implied that we were going too slowly in cutting the deficit, now you’re saying, as some people say, we’re going too fast. I think we’re getting it about right, we’ve got the right balance and if you look at what we’ve done to reduce business taxes in this country, attract international firms to this country, reduce the jobs tax that the Labour party was going to introduce. Those are all things, driving and enterprise strategy, alongside it we are reforming education and welfare because they are the real long term hindrances to this country being competitive and we are very aware – and that’s what we are addressing at this conference – that in the current world, the world we face, there are going to be Western countries that either sink or swim when faced with these problems and I am absolutely determined that Britain is one of those countries that is a success story, where we are creating the jobs and increasing the prosperity.

DM: How do you go about signalling to the country, and you mentioned those further savings that you are going to need to make and some of them will hit people on very, very low incomes or indeed on welfare benefits, how do you signal that we really are all in this together when as you know the characterisation of you indeed personally and of many members of the Cabinet, is that you are posh boys who are out of touch with the wider public?

GO: Well that is the characterisation by my political opponents who created this mess that the country is in, had all of those years in the Treasury – Ed Balls, Ed Miliband – when they could have taken the kinds of decisions we’ve taken to for example increase Stamp Duty on the sale of very expensive homes, to restrict tax relief for the very richest, to increase Capital Gains Tax. We’ve taken those decisions because we inherited a tax system where for example some people in the city were paying lower rates of tax than their cleaners. That has been completely unacceptable and we have taken those decisions because we are very clear that the richest in our society have to contribute most to dealing with these problems of debt and deficit and so on, but we are equally clear that frankly you can’t ignore a welfare system that has paid people in some cases to not work rather than to work so we are also addressing the welfare system and frankly you are not a serious contributor to the debate about the deal with debt and deficit if you think it can be exclusively done through taxes on the rich. We completely understand that it has got be done across the board, looking at government spending but we are also very clear that both in the budgets I have already had as Chancellor and in future budgets, the rich will bear the greatest share of the burden of dealing with this problem.

DM: But how can you say that when you cut the top rate of tax for the very rich? They are getting a 5p cut in income tax next year.

GO: It is precisely that kind of synthetic debate that I am trying to cut through. The 50p rate raised no money, it was costing jobs and investment, the people who were paying the price for the 50p tax rate were the poor looking for work, not the rich who were not in fact paying it so that’s why we got rid of it. For 13 years of a Labour government, for the entire period they were in office until the last couple of weeks, they had a 40p rate of tax. We’re going to have a 45p rate of tax because it’s hopeless for Britain to have a 50p rate which is higher than many of its European competitors but in the same budget I increased taxes on the rich more than four times as much as the saving from the 50p rate, I increased Stamp Duty for the richest properties, I restricted reliefs for the wealthy. I did all these things precisely because I am very clear that the wealthiest must bear the greatest share of dealing with this deficit problem. They can’t do it alone but they must bear the greatest share.

DM: And to that end are you listening sympathetically, as Nick Clegg seems to believe you will be, to the Lib Dems idea of a mansion tax and some kind of unspecified wealth tax?

GO: Well no, I don't think either of those ideas are the right ones. I don't think a mansion tax is the right idea because, I tell you, before the election it will be sold to you as a mansion tax then after the election a lot of people in Britain are going to wake up and find that their more modest homes have suddenly been reclassified as a mansion. So we are not going to have a new mansion tax, nor do I think it is sensible to have a wealth tax in the sense of a tax on your wealth levied annually. Other countries have tried that and it hasn’t worked and it has driven enterprise and investment abroad so we’re not going to do those two ideas but I am very clear that the rich will have to make a contribution to closing the budget deficit. I am absolutely clear that in the decisions we take in the years ahead, as well as dealing with welfare, as well as continuing to reduce government spending in departments, we are also going to have to ask the rich to make another contribution.

DM: And Chancellor, what state is the economy in right now from your view? When do you think we will be out of recession?

GO: Well what I would say is that the economy is healing, that is the phrase that I would use. Obviously it was deeply damaged by all that we’ve been through over the last few years but I think it’s encouraging that we’ve seen these million jobs created in the private sector, I think it’s encouraging that the budget deficit has fallen and you look around Europe, indeed look at the debate in the United States of America at the moment, you can see that other countries are wrestling with similar problems. It’s just in Britain I think we have got a government that is tackling the problems head on, earning that confidence which is reflected in the fact that as Chancellor of the Exchequer I can borrow money from the rest of the world more cheaply than anyone who has ever done my job before me.

DM: Well why don’t you borrow some more and get some of these much vaunted infrastructure projects underway? You have kicked the idea of a third runway at Heathrow or whatever it’s going to be all the way to the next election.

GO: Well first of all we are building infrastructure and we are spending more on capital, which is the money that you spend on things like infrastructure, than the previous Labour government. We are actually spending more on roads now than we were doing in the boom years so we are, where we’ve got resources in these difficult times we are spending it on the infrastructure of this country. I have hired on the behalf of the government, Paul Deighton, who is the man who delivered the Olympic Games, to come and deliver for us on the infrastructure projects our country needs. If you are telling me we need more roads, more rail links, more energy plants, more broadband and indeed more airport capacity in the south-east of England, I completely agree with you. These things have not happened over the last fifteen years and they are going to happen in the years ahead.

DM: Can I just ask you a question, a specific question about a private company, a private sector company, that you are no doubt looking at very closely, BAE Systems and its proposed merger takeover by EADS. Are you looking at that and making sure that it will not cost British jobs?

GO: Well obviously this was a proposal brought to us by these two companies and they are both familiar to us in Britain, one is British Aerospace, BAE of course is our big defence manufacturer and EADS makes Airbus and has very important plants in North Wales and in Bristol. Our approach to this has been to make it very clear that our priorities are of course the national security of the United Kingdom, second jobs and investment in the UK and those are the tests against which we are judging the proposal brought to us by these two companies.

DM: Can I just ask you about tax and the wealthy, one more question on this? We know your view on aggressive tax avoiders and avoidance schemes, they are ‘morally repugnant’ as you said at the budget. You will be well aware that the Times newspaper is running a campaign at the moment and uncovering some of these schemes and there is a simple answer to these, they may be technically legal until they are challenged by HMRC, why don’t you just name the people who are taking part in them?

GO: I am perfectly prepared to consider that idea but of course you’ve also got to respect the fact that we have in this country taxpayer confidentiality which is a very important part of a free and democratic system. You don’t want people like me knowing the tax affairs of everyone in the country so …

DM: Yes, but it’s morally repugnant.

GO: I am completely … you are quoting back at me a phrase that I used and I am absolutely clear that aggressive tax avoidance, in other words engaging in schemes which are not designed to promote investment or create jobs or the like but are actually just constructed to reduce tax, are not things we want to see in this country and I am very aggressively closing them down, shutting down for example people buying expensive homes through companies so they don’t pay Stamp Duty, shutting down the way people disguise their income to avoid income tax and actually the amount of money we now collect from rich people has gone up under this government. It is higher in every single year of this government than it was in any one of the 13 years in which Ed Balls and Ed Miliband sat at the Treasury.

DM: Last question, no doubt being talked about in the bars and halls around the conference, about gay marriage which we hear from Conservative activists, some say it is costing them support on the streets. It’s a party issue, some members of the Cabinet, some of your Conservative colleagues have made personal videos supporting the issue of gay marriage, are you going to make one?

GO: Well I support gay marriage. I support gay marriage because I’m a believer that Conservatives support the institutions of commitment so I am a supporter of it, I’ll be voting for it when it comes to the House of Commons but it will be a free vote issue. In other words, every MP will vote according to their conscience and I will vote according to my conscience in favour of gay marriage.

DM: Chancellor of the Exchequer, many thanks. George Osborne there, live with us from Birmingham.