JOHN HUMPHRYS:                    So, to our other contender 
David Davis, who also launched his campaign just a few days ago.

                              Mr Davis had a successful 
business career before he became an MP in 1987.  John Major made him the 
Minister for Europe in his government.  He served for three years.   He 
did not join the Shadow Cabinet when the Tories were thrown out. Instead 
he became the chairman of the powerful Public Accounts Select Committee 
- the committee that holds the government to account for the money it spends 
and he has rapidly moved into the seat vacated by Iain Duncan-Smith.  
 
                        Good afternoon, Mr Davis. 


DAVID DAVIS:                A new skill acquired. 

HUMPHRYS:                    A new skill, well done. 


                        Your colleagues seem to 
want, your colleagues in the party seem to want to take back the centre 
ground, that's how they seem to think they can recover their position. 
But you are coming from the right.  

DAVIS:                    Yes, I don't think the centre 
ground is a good description. What we have to take back is that part of 
the political agenda that the public care most about, have cared most about 
actually for fifty years.  That is public services, law and order, health, 
education and of course the economy.  At the moment the economy is going 
fine, so it's the other three they care about. 

HUMPHRYS:                    But it's on the economy, 
it's on economic policy that you mostly, it seems to me, want to have, 
what was the phrase we used to use all those years ago - clear blue water 
- let's resurrect the phrase clear blue water for the purpose - I'm trying 
to remember who said that, one of your party chairmen I think wasn't it, 
way back when,  Jeremy somebody or another.   Anyway, you want to promise 
bigger tax cuts, that's what you are about isn't it. 

DAVIS:                    Well, I think it's a bit 
more complicated..

HUMPHRYS:                    Yeah, but let's try and 
deal with things that people will understand clearly, that's one of the 
positions from which you come. 

DAVIS:                    Of course, we want a lower 
tax economy but there are good reasons for that which actually impinge 
on public services as well and it's very simple, if you have low tax rates, 
you get high growth rates. If you have high growth rates, you get high 
tax takes and that allows you both to increase spending and continue the 
decline in rates as you go along, that's what happened in the 1980s, Margaret 
Thatcher successfully did that in the 1980s, we lost that, the grip on 
that at one point and the government is about to throw it away again.  


HUMPHRYS:                    So, that means that you 
would offer bigger tax cuts next time around if you had the choice?

DAVIS:                    Well I think we have got 
to look very carefully at what we can do to save money, bear in mind...

HUMPHRYS:                    But why do you even have 
to think carefully about - you've just made a very convincing case, some 
people might think, for a lower tax economy, therefore it follows you would 
offer bigger tax cuts. Unless of course you are spinning me here.  

DAVIS:                    No, no, you know I don't 
believe in spin. 

HUMPHRYS:                    Well that's what you 
say, we'll test that in that next few minutes. 

DAVIS:                    You can test that as you 
say in the next few minutes.  But firstly, a low tax economy will deliver 
both more money into people's own pockets, we are not taking away their 
money afterall. Secondly, it will deliver more growth and it's growth that 
actually generates the income out of which we can pay for greater public 
services.  To do that, to get on that virtuous cycle is the hardest part 
and you do that by attacking the waste inefficiency and the method of delivery 
of public services.

HUMPHRYS:                    Which of course is what 
every single government since the year dot has said it will do, including 
your last for eighteen years, you were attacking all of those things. 

DAVIS:                    Slightly differently of 
 course, I have spent the last whole Parliament actually, studying this 
exact point. 

HUMPHRYS:                    That is true but you've 
got to start that virtuous circle somewhere haven't you and what you did 
last time in the election, you offered out of the four hundred odd billion 
pounds that we spend, you offered cuts of two per cent to enable..

DAVIS:                    Eight billion. 

HUMPHRYS:                    Eight billion pounds, 
to enable people to spend. That was pretty small wasn't it by any standards 
it was small, you thought it was half hearted so therefore you'd offer 
more next time, that's what I'm trying to get at.  

DAVIS:                    It always starts small and 
you start the virtuous circle slowly and then it grows..
HUMPHRYS:                    But you said it was half-hearted?

DAVIS:                    It grows beyond that. 

HUMPHRYS:                    Yes, but you said, you 
have said that that was half hearted, what was done last time was half 
hearted, so therefore you would do something that was whole hearted next 
time. 

DAVIS:                    We've got to press that 
case, of course we have got to press that case. What I said was the presentation 
of the case was half hearted, I've suddenly recognised the quotation you 
were talking about. 

HUMPHRYS:                    Ah, confused and half 
hearted...

DAVIS:                    What I said was is that 
we have got to persuade the public of the importance of this case. We've 
got basically an economically illiterate case being put to the public by 
a lot of commentators. I'm sure not you...

HUMPHRYS:                    Certainly not. 

DAVIS:                    And what we have to do is 
to make the case, to make the case that I've just made to you about the 
relationship between growth rates and tax rates, low tax economy leads 
to high growth rates and high growth rates gives you right..the ability 
to both spend and...

HUMPHRYS:                    If it's so incredibly 
obvious, why on earth didn't your party do that the last time around then. 
Why, when one of your people, Oliver Letwin, said well maybe it could be 
as high one day as twenty billion, my goodness, they hid him away in the 
deepest reaches of Dorset. 

DAVIS:                    With the greatest of respect, 
I've taken two self-denying ordinances in this, I want to see my party 
pull together again and I'm not going to go into criticising either individuals 
or indeed historic tactics. I mean that's a simple fact on that. 

HUMPHRYS:                    Alright then, but something 
else you said, one of your quotes rather than somebody else's, you didn't 
want to get into, I think the phrase was 'a Dutch auction of ever higher 
spending policies'.  So you would promise lower spending on public services. 


DAVIS:                    No, no, what I'm saying 
here is that it's the wrong approach completely to just think about how 
much money you're going to spend. What 
you should be thinking about, what matters to people on the ground is 
how well they're treated, what their life expectancy is, we've got a Health 
Service at the moment that kills five-thousand people a year for infections 
they didn't have when they go into hospital, tens of thousands from cancer, 
cardiac disease, strokes and so on, and tens of thousands more because 
of mistakes, these are, medical mistakes. These are things that will not 
be solved by money, they're going to be solved by the way we run the Health 
Service, and what I want to see is a Health Service where in, where we, 
not privatise it, we personalise it. We actually give people more...

HUMPHRYS:                    ...sounds like a spin 
word to me, personalise.

DAVIS:                    ...well no it isn't, it 
means something, it means giving power to the patient, power to the GP 
to choose hospitals for example. I see no reason at all why we should not 
be able to have free at the point of delivery a choice of healthcare for 
people, because that way you're going to get pressure on the system to 
actually give better quality health care and actually better value for 
money healthcare.

HUMPHRYS:                    But let's be quite clear 
about this, you would be prepared to spend less, because you've said, chucking 
money at it doesn't solve these problems and you've said you want a lower 
tax economy and all the rest of it so therefore if one adds up those two 
facts what one comes down unless of course you're afraid to say this because 
you can see how it might be spun, you would therefore want to spend...

DAVIS:                    ...clearly John, you've 
actually not followed my argument, I've not done it well enough, I've not 
presented it well enough...

HUMPHRYS:                    ...no I'm sure the fault 
lies with me, let me try and clear it up very very simply. You want to... 
you do not believe chucking money at the Health Service solves the kind 
of problems you've just described, you want to have a lower tax economy, 
having a lower tax economy means ultimately spending less, unless of course 
you can increase the wealth of the nation by other means...

DAVIS:                    ...that's right...

HUMPHRYS:                    ...but that...

DAVIS:                    ...no by other means...

HUMPHRYS:                    ...that as you say takes 
time. You've got to create that virtual circle, so in the meantime would 
you be prepared to say, "we'll have to cut a bit more out of public spending?"

DAVIS:                    No no no no. You don't have 
to cut, after all these..we're talking about different rates of increase 
in fact, but take the last government, over the course of the last government, 
lots of money thrown at the Health Service as we did in previous years, 
but there wasn't actually any increase in Health Service employment at 
all. That money must have gone somewhere else, we actually don't know where 
that money went. The point I am making is that what people care about is 
the delivery, what they get from their hospitals, how, if they go to hospital, 
let's say they've got, let's say they've got stomach cancer, in this country, 
they have got a quarter of the survival chance they have in Germany and 
about a third of what they have in France. We should be looking at these 
other systems and seeing whether or not we can deliver those sorts of survival 
chances...

HUMPHRYS:                    ...ah well that's...

DAVIS:                    ...and then, once you've 
done that, you say how much we're going to spend. This is, that's the way 
round...

HUMPHRYS:                    ...that is a very interesting 
comparison isn't it? Because of course the French and the Germans spend 
hugely more than we do, particularly on things like...

DAVIS:                    ...but in different ways 
too.

HUMPHRYS:                    Ah. In different ways. 
And you know where they get that extra money from. They get it from people 
taking out private insurance, that's where they get their money from, you 
approve of that?

DAVIS:                    Well, I think we've got 
to look at all the systems. There, they've got compulsory insurance systems, 
the difference between a compulsory insurance system and a state insurance 
system is minor in some respects...

HUMPHRYS:                    ...but there's also an 
extra top-up of private insurance as you well know, in France you can spend 
more money and they do.

DAVIS:                    But again you're rushing 
back to the sum of money, the simple fact of the matter is that we actually 
health care results which are as bad as people who spend a lot less than 
we do, what we should be looking at here is how is it delivered, what is 
it that actually leads Germany to deliver four times as good a result in 
let's say stomach cancer, or twice as good a result...

HUMPHRYS:                    It's partly much more 
money.

DAVIS:                    Well it's not four times, 
or twice as much money.

HUMPHRYS:                    Oh it isn't but it depends 
how you spend that money.

DAVIS:                    It's how you spend it. That's 
precisely the point. And that's what I've spent four years looking at. 
Time and time again, the failure of our system. Failures in terms of people 
dying...

HUMPHRYS:                    ...right.

DAVIS:                    ...failure in terms of operations 
being cancelled. These are very serious issues which if you just reduce 
them to simply, how much cash? You're actually answering the question the 
wrong way round.

HUMPHRYS:                    So in other words, I'm 
trying to work out what you mean in relation to what Tony Blair is doing 
for us, proposing to do for instance. Not a lot of difference between you 
because he says precisely this, he says it's all about efficiency, it's 
all about delivery and so on, and so on and so on.

DAVIS:                    I mean, he knows the words...

HUMPHRYS:                    ...not much difference...

DAVIS:                    ...oh yes there is. He knows 
the words, he doesn't know the tune unfortunately.

HUMPHRYS:                    ...well I don't know 
the tune that you're singing either to be perfectly frank.

DAVIS:                    ...take for example, take 
for example the use of private sector in health care he's talked about, 
I approve of that, but what I want to see is that done transparently so 
that we can actually measure the difference between the private sector 
and the public sector...

HUMPHRYS:                    ...that's a question 
of management, I'm looking now at much more profound policy than that.

DAVIS:                    ...it's actually a question 
of accountability to parliament as well.

HUMPHRYS:                    True...

DAVIS:                    ...because they're trying 
to say that PFI cannot be looked at by parliament, that's actually a very 
important part of the system. I mean we're disagreeing into rather technical 
details...

HUMPHRYS:                    ...well I want to avoid 
doing that, because what most people will say, as you've just said, if 
I get stomach cancer, heaven knows I want better treatment than I'm getting 
at the moment and yes...

DAVIS:                    ...and that can be done.

HUMPHRYS:                    Without any extra money 
at all?

DAVIS:                    No, no not without any extra 
money.

HUMPHRYS:                    Ah well, there we are, 
you see.  This is the problem that we have...

DAVIS:                    ...but what I'm saying to 
you...

HUMPHRYS:                    ...here is a man who 
wants to cut taxes but you don't want to spend...

DAVIS:                    ...cutting taxes in the 
long run will not lead to lower revenues, it leads to higher revenues. 
If you look at Margaret Thatcher's era, right at the beginning, when this 
was a really contentious issue, you went from time when you had a Labour 
government which had high tax rates and low growth, almost zero growth...

HUMPHRYS:                    But there is this thing 
called the Laffer curve isn't it, and once you get beyond a certain, but 
anyway...

DAVIS:                    Exactly.

HUMPHRYS:                    Getting technical, getting 
technical again.

DAVIS:                    Getting technical. But a 
vigorous economy delivers better scope for public spending than a, than 
a...

HUMPHRYS:                    And you've got to get 
that vigorous economy. Now one of the things that this government has done 
is introduce a minimum wage against which your party was wholly opposed 
in the early stages, now is wholly in favour. You yourself have described 
it, and I quote, as a cruel confidence trick on the poor, you said that 
only last year. So you'd rescind it?

DAVIS:                    No, I'll tell you why. I 
mean why...

BOTH SPEAKING TOGETHER

DAVIS:                    Let me explain why it's 
a cruel confidence trick on the poor...

HUMPHRYS:                    ...just answer that first 
point though, it would go, would go, would it?

DAVIS:                    ...no no, you have to, no...

HUMPHRYS:                    ...oh it wouldn't go?

DAVIS:                    You have to understand why 
it's a cruel confidence trick on the poor. When the minimum wage was introduced 
it increased by twenty-six pounds a week the average cost of, the average 
amount paid to somebody on the minimum wage, head of a family, someone 
like that. Of that twenty-six pounds, he got five pounds. He kept five 
pounds, the government kept the other twenty-one. The whole system we now 
have, has most of the money taken back by the government. Now we've now 
got a new system, the Working Families Tax Credit. What we have to come 
up with here is a new system of getting these people out of the dependency 
culture and that requires a whole new strategy, not just the question of 
the minimum wage, the whole question of how this, how this funding works, 
we've got more than a million extra people...

HUMPHRYS:                    ...and as part of your 
strategy you would get rid of the minimum wage?

DAVIS:                    I'd certainly look at that, 
I'm...

HUMPHRYS:                    ...look, come on, you 
see we're back to this old spin thing. You said it was a cruel confidence 
trick, that's very very strong language indeed. How could you in all conscience 
continue to inflict upon this nation a cruel confidence trick? You couldn't, 
could you?

DAVIS:                    No we wouldn't, no we wouldn't...

HUMPHRYS:                    So you'd have to get 
rid of it?

DAVIS:                    Absolutely not, and what 
one would look at is how the, how the figures work out for the man, for 
the, or the woman, who is actually receiving this income. What happens 
to their employment...

HUMPHRYS:                    ...I understand all of 
that but you see...

DAVIS:                    ...what happens to their 
employment prospects? What happens to their income? Now when it was done, 
it was under a previous welfare system and those are the numbers I just 
gave you...

HUMPHRYS:                    ...I'm not arguing with 
you about that...

DAVIS:                    ...now what we have to look 
at is a strategy for ensuring their employment at the same time as improving 
their income...

HUMPHRYS:                    ...but if you...

DAVIS:                    ...and we've got to do that 
with one of the worst welfare systems that I've ever seen...

HUMPHRYS:                    ...but if you...

DAVIS:                    ...working family tax credit, 
tax credit. Now the priority actually bluntly is to get out of the dependency 
culture, once we're out of that we worry, we worry about how you improve 
their ability...

HUMPHRYS:                    ...in order to pursue 
the, and we haven't got very long here, in order to keep this, to get out 
of the dependency culture, you've got to encourage the free market, you 
said the minimum wage was abandoning our belief in the free market another 
reason why you cannot surely sit there this afternoon and say, "we might 
keep it." You can't, you've got to say, "we'll get rid of it" surely?

DAVIS:                    No no, we've got to say 
what actually, look at the detail of the, you cannot just make sweeping 
judgements, one of the points I was trying to make in this whole leadership 
cabaret is the point about modern Conservatism is you are bringing fundamental 
principles to apply to modern problems which you've got to understand how 
the problem is delivered. Now I suspect at the end of the day we'll end 
up with a minimum wage which is, which is not growing up the way the current 
one's going, but what we have to look at is the welfare system and get 
out of that first, dependency culture is the most dangerous thing we have.

HUMPHRYS:                    David Davis, thank you 
very much indeed.

DAVIS:                    Thank you.