BBC On The Record - Broadcast: 28.04.02

==================================================================================== NB. THIS TRANSCRIPT WAS TYPED FROM A TRANSCRIPTION UNIT RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT; BECAUSE OF THE POSSIBILITY OF MIS-HEARING AND THE DIFFICULTY, IN SOME CASES, OF IDENTIFYING INDIVIDUAL SPEAKERS, THE BBC CANNOT VOUCH FOR ITS ACCURACY ==================================================================================== ON THE RECORD RECORDED FROM TRANSMISSION: BBC ONE DATE: 28.04.02 ==================================================================================== JOHN HUMPHRYS: Good afternoon. This week the Labour Party is celebrating its fifth anniversary in power. Five years since Tony Blair became Prime Minister. I'll be talking to John Prescott about what they've done and what they want to do. I'll also be asking Matthew Taylor of the Liberal Democrats whether Labour has stolen their clothes. And the Post Office. The government's got a big problem whatever it does with it. We'll be reporting on that after the news read by Fiona Bruce. NEWS HUMPHRYS: The Post Office is in big trouble. Will the medicine that's been prescribed kill it or cure it? And has Labour stolen the Liberal Democrats' clothes? All that later in the programme. But first.... JOHN HUMPHRYS: Is the longest honeymoon in Britain's political history finally coming to an end? This week it will be five years since Tony Blair made that triumphal walk up Downing Street and the crowds cheered as the sun shone. It stayed shining for a remarkably long time. Mr Blair himself is still extraordinarily popular and if there were another election tomorrow he'd probably walk it. But there are several dark clouds on the horizon and when the pollsters ask the more detailed questions, they reveal a deep unease with the way the government is managing things. Many people think there's too much spin and too many scandals. In the Labour Party itself there's growing disquiet within the ranks over the sense that the government has not delivered exactly what they wanted. And above all there's the public services: health, education and transport. People do not believe - according to the polls - the promises have been fulfilled and they are doubtful as to whether they will be. The Deputy Prime Minister John Prescott is with me. Good afternoon Mr Prescott. JOHN PRESCOTT: Good afternoon John. HUMPHRYS: Let me steal one of your favourite phrases - you'd have got it eventually in this interview without any doubt at all, so I'm going to steal it right at the very beginning 'traditional values in a modern setting'. PRESCOTT: They're all saying it. HUMPHRYS: I'll grant you that, that's why it was in my mind. I put it to you that the traditional values, partly because of Gordon Brown's Budget obviously, traditional values have been shinning through rather more brightly recently, is that a fair thing to say? PRESCOTT: No, I don't think so. It's rather kind of identified with our attitude towards health which has always been our traditional value and I think the Budget has probably made that clear. But I think it's been right through our five years. John, on May 1st, the moment you've just referred to, five years' ago when Labour was elected, just remind ourselves of what people predicted about Labour, because the same people are making similar predictions now. They said that the economy would collapse, the opposite happened, they said inflation, taxation, mortgage payments, inflation, interest rates would all soar, the exact opposite happened. They said there would be more people out of work and if you paid the minimum wage, a million more people would be out of work - the exact opposite happened. They said that de-centralisation and devolution would cause a constitutional crisis, exactly the opposite happened and that Britain's influence abroad because we were a government that had had no experience of government, would be reduced, exactly the opposite. So in reality, those predictions there were exactly wrong, there's no doubt about that and now five years on and I often say to you and I won't use this in my programme - my old .... HUMPHRYS: ..the five pledges... PRESCOTT: ..the five pledges, but you know if I'd have had a pledge card on May 1st, five years ago and said we are going to increase employment by one and a half extra jobs, we'll have the lowest inflation, interest, mortgage rates for forty years and that we will get a million kids out of poverty, we will reduce crime by twenty per cent, if we put all those things and break out of the cycle of boom and bust, if I'd have put them on the card instead of that, I can imagine the programme I would have been having with you during the election. But that is what happened under Labour, not only did we achieve our objectives, they were traditional values in a modern setting and consistent from day one to now, not only at home but abroad also. HUMPHRYS: Right, I'm not going to argue for a moment and I think nobody would that you haven't achieved some things, no doubt about that. Clearly some things... PRESCOTT: ...very good, two landslide victories... HUMPHRYS: ..sure, but as I say, if you look in a bit more detail at the polls, when the more detailed questions are asked, people begin to have serious doubts, including many people in your own party... PRESCOTT: Are you going to come to some of those questions? HUMPHRYS: Indeed, oh absolutely I am, of course I am, absolutely. And the feeling in your own party certainly as to why it hasn't happened, why the promises that they felt had been made to them, have not be delivered, is that you did not embrace those traditional values sooner. Let me just quote to you Mo Mowlam, who of course was in your government until recently.. PRESCOTT: ...happy quote of what's going on... HUMPHRYS: won't necessarily agree with her, I'm sure. This is the one about her belief in what she thought would happen. She said "I was New Labour" absolutely no doubt "I was New Labour. I believed in changes but we should have worked with the unions and the party more". So in other words, if we'd embraced traditional values earlier, things might have been better now with some of those big areas that I touched on. PRESCOTT: Well, I don't quite know what she means as with most of Mo's statements I have to confess knowing that. But let's put it in its context, we said traditional values in a modern setting and there are certain principles which we all agreed on, trade unions, the Labour movement, that we believe economic prosperity and social justice should come together. This is probably the first government's that's ever achieved that really in the scale that we've done it and that's largely 'cause we took difficult decisions right at that beginning of two years to break out of this cycle of boom and bust. Now that did create certain difficulties for us because we...(both talking together)...we reduced the debts and transferred what eleven billion pounds from paying interest on debts to pay how to work in health and education. There were difficult decisions but no trade union, nobody in the Labour movement, right on the border, would reject the fact that we got one and a half million people back to work. That we put more resources into public services than we've ever done before and these are objectives and stability in the economy and even mortgage payments for trade unions and others. These are success stories and we have delivered on an agreed contract if you like in our manifesto on the Labour movement, embodied in the manifesto, over eighty per cent was delivered. Now, I really can't accept and they were all traditional values about money into public services, education and health, but all in order of priorities, because we inherited a massive disinvestment in our schools and the public services. HUMPHYRS: Yes but as you say, you didn't put that money in the early days for the reasons that you've just described... PRESCOTT: we did, not enough would be... HUMPHRYS: Alright, no enough, but what you've now done and this really is traditional Labour, what you have now done is put a bit extra on taxes and you're going to put a great deal more money into public services, whether it'll work or not we have... PRESCOTT: Where's the taxes John? HUMPHRYS: The extra on National Insurance is a tax. PRESCOTT: That's not a tax. Wait a minute... HUMPHRYS: We will be paying more in our taxes. PRESCOTT: No, no. We said that we would not increase income tax, now by definition... HUMPHRYS: National Insurance is a tax, you know and I know and everyone watching the programme knows. PRESCOTT: It's not the income tax and everybody knows that the insurance payments, as re-emphasised now on health, is an insurance payment for social benefits received. HUMPHRYS: Alright. PRESCOTT: Wait, listen, no but it is an important point John. So when people are paying five pound on National Insurance with the one per cent increase and let's say five pound from the tax, I think it's estimated going into these services, that's ten pound. It's sixty pound in France, forty pound I think it is in Germany... HUMPHRYS: It's not the point I'm making though. PRESCOTT: I know you're not, but really, basically it's quite important, how we finance our public services is critically important but we did make one important difference as I mentioned to you before, we didn't do like previous Labour governments have done, in order to achieve the traditional values of which we are talking about, we need to get stability in the economy and that's precisely what Gordon Brown did. HUMPHRYS: But I'm surprised you rose at that one in a sense because it's turned out to be popular. I mean you've put up taxes - alright not income tax literally speaking I fully grant you that - but you've put up taxes and people actually liked it. And what I am suggesting to you is that you could have done it earlier and indeed you could do more of it now, if you're to believe the reaction there's been to the Budget. PRESCOTT: No, let me just come to that point again because it's a very important point. You could raise it by tax if you wish but we said that we wouldn't get into either raising taxes, it was a commitment... HUMPHRYS: ...let's not be too.... PRESCOTT: said we wouldn't do that. We also said we wanted to reduce government borrowing because it had an effect on inflation and interest rates. They were an essential part of getting stability into the economy. We said once we get that stability, different to previous Labour governments who tried to do both things and ran into economic difficulties, we did that and then we are putting the money in. So the resources are coming in a sustainable way, the great problem with the British economy is it's always short term, it's never long term. Investment, whether it's in transport, in our hospitals or schools, so we have picked up a problem of massive disinvestment in all our public services, which are beyond what you could raise in tax and avoid the economic problems. HUMPHRYS: And which you have now begun to address, you've increased National Insurance. But the point I am making to you, is that bearing in mind how popular it has been and maybe this is because the NHS is deemed to be in such a mess. But bearing that in mind, you could have done it earlier and the message to you seems to be, you can do a bit more of it and that is traditional Labour isn't it - traditional values. PRESCOTT: Well, what is traditional is to provide good public services and get a good economy right, and what is different from the Tories, they believe if you get the economy it trickles down. What makes Labour different in its traditional value approach is that we believe we have to help everyone, that's a universalism if you like, but also, some need to be helped more than others, and that's what I call another theme of principle that runs through this traditional values and modern Labour is that a kind of progressive universalism, that's why pensioners at the really bottom end get more, it's why we've taken the kiddies in poverty out these, out of the poverty levels, so in that sense, we don't believe it just percolates down, we actively intervene from a strong economic base and intervene to secure the benefits we've got to date. That is intervention by government, providing an enabling program to achieve economic prosperity and social justice. HUMPHRYS: And if you need to do that again, to improve the public services, you are quite prepared to do so. PRESCOTT: Well we have the balance of the economy and social justice, and they need to be kept in balance because they are two sides of the same coin. We will take whatever is necessary in those financial judgements to achieve that. But let me just say to you as well, an important point, because it's been controversial, another example of difficulties if you like that came out of the interpretation of traditional values and modern selling was to use the private finance which we talked about I think in our last, our program. But both public money has nearly doubled in the period from when we came in to two-o-two-o-three, so has the amount of private money, so we've almost seen a doubling of the amount of money, increasing the private sector and the public sector involvement so we can deal with the massive disinvestment in a shorter period of time than simply allowing, remaining, relying totally on the tax framework... HUMPHRYS: ...right but just be quite clear about it. Given as you say, the economic balance has to be right, you see no reason why you should not do more of what you have already done, and that is to put more money, more public money, more money raised by National Insurance or whatever it is, into public services. You think that's the right way to go? PRESCOTT: I think it's right to take all these into account, as Gordon does, it's a prudent approach, but the balance is important. We are not going to give up John, what we've got in the stability in the economy and the investment of public services and go back to the old boom and bust thing again... HUMPHRYS: ...okay... PRESCOTT: ...always meant that those who are worse off always suffered more and we had eighteen years of a Tory government to see the evidence of that. HUMPHRYS: Let's have a look then at another sort of, traditional value, if you like and let's relate that to public transport. You've already accepted I think that you took a gamble in the early days of your running... PRESCOTT: ...Railtrack. HUMPHRYS: ...Railtrack, yes indeed. PRESCOTT: ...and the ten-year plan wasn't a gamble. That was the first attempt of long-term investment... HUMPHRYS: ...the gamble related to Railtrack and it's about Railtrack that I wanted to ask you. You took a gamble by not re-nationalising it, or urging that it be re-nationalised and you did... PRESCOTT: ...but that was the party policy, I didn't make that decision... HUMPHRYS: ...sure, no, no... BOTH SPEAKING TOGETHER PRESCOTT: the conference said that they don't want to spend six-billion pounds just giving compensation to shareholders when we desperately need it in the investment in the Railtrack, the engines, the trains. HUMPHRYS: But you could obviously argue that to have done that would have been to assert traditional Labour values. Now as it turns out, as things have turned out, the disaster that Railtrack became, and all the rest of it, it was a pity that you didn't do that, isn't it? PRESCOTT: Ah well let's take that point, it is an important point, and many of these things have to be taken in the context of the time that you are dealing with these decisions. For example on Railtrack, if Railtrack in its present state, if I could have had Railtrack like that, basically to get on with it and deal with it in the way it is I would have preferred it. But that wasn't the choice two years ago. Would I find six-billion pounds... HUMPHRYS: was more than two years ago. PRESCOTT: compensation, sorry, I mean, in the first two years. Thank you John. Would I in those first two years find six-billion pounds when we said our priority as to accept the financial limitations of the previous administration, transfer the debt payments that we were saving by putting people back to work, put them into Health and Education. There is no way I could have argued, and I argued this to conference, that I could justify six-billion pounds, and I ....... snap my hand off, giving compensation at rates of share increases that would be very beneficial to them, to have done different would have been that I would have had to confiscate without it..., without compensation and that was not the policy. HUMPHRYS: But do you think now, given what's happened, given the state it was in, given that you had to fork out a lot of money anyway to compensate shareholders one way or the other, do you think it is a pity it didn't, it wasn't re-nationalised? That you didn't find a way of doing it then? PRESCOTT: No, because the money was for the priorities for Health and Education and get the stable economy. We could have borrowed the money if you like it to pay, but then we're back into the same case. What Gordon Brown did was to reduce the payments on the unemployment, save something like eleven-billion pounds on interest, transfer that into Health and Education, would it have been right, I don't believe it would, and I took that decision, that six-billion pounds of that should be paid for compensation to shareholders? HUMPHRYS: Alright, but it's not six-billion pounds any longer... PRESCOTT: the way, the traditional value isn't that we give it to the shareholders, the traditional value here is that we put it into Education, your article in The Times today is about how we get a damn good education system and I agree with you. We secondary modern lads will stick together! HUMPHRYS: No I did actually go to grammar school but I, I probably shouldn't have done. PRESCOTT: I know, I saw, you went on truancy and went out as ........ HUMPHRYS: ...exactly, I left at fifteen. But the point, it wouldn't cost you now, would it, today, it wouldn't cost you anything like the money that it would have cost you back then? PRESCOTT: ...well no, today, today. I mean, you've got a situation where a company's gone into administration, the Court's made an Order, whatever the controversy about it, the point I was making John, where you are in year four-five is different to where I was in year one-two. What I wanted to do, and this is most important about Labour's approach, is to take a long-term approach. For too long, government's took short-term Labour and Tory decision about capital investment. So we see it in our school's, a third of our hospitals were built before the ..... National Health Service into being, everybody took easy options, 'cos politicians knew they were only there for five years. We had a wonderful chance that the electorate gave us. They gave us a massive majority and that gave us a chance of saying we could get, possibly get a good turn if we keep the trust of people and get it right, and then start wholesale long-term investment. The investment plan that I produced for Transport is the biggest amount of investment ever envisaged to go in the service, so massive traditional right, but public and private money in a modern setting. HUMPHRYS: ...but now you've got... PRESCOTT: ...that was the plan we'll still have to work to... HUMPHRYS: ...but now you have another opportunity to do what would be, to go back to the traditional values in keeping with that, and that is re-nationalise Railtrack at this stage. It wouldn't cost you very much to do it, you could do, it would be complicated I freely grant you, but you've shown people want you to do it. I mean the public is actually behind it. They wouldn't want you to do... BOTH SPEAKING TOGETHER PRESCOTT: ...actually, what the public want, it's a bit like the Underground. They want an Underground that works, they want the Railway system that works, frankly, they don't really care how it's financed... BOTH SPEAKING TOGETHER HUMPHRYS: popular with... PRESCOTT: ...well because they've rejected to the privatisation of Railtrack... HUMPHRYS: why don't you say alright? We'll do that. Traditional values. Why don't you say we'll do it? PRESCOTT: Well, because I think you have to make a judgement in the traditional values as they're a high priority. You know, we've always said that socialism was about the language of priorities as well, and you have to make a judgement. But either give it to improving the schools or give it to shareholders. I think traditionally you would go along the road to say in schools, we're at one on that. HUMPHRYS: We at one, alright. Let's look at what's probably the most famous soundbite you, your party, Tony Blair has ever produced. Whether he did it himself I don't know, but 'tough on crime, tough on the causes of crime' Now that resonated with people in a very big way, and what your party certainly took from it was that you would deal with social exclusion. You're in charge now of course and the social exclusion area, all the sorts of things that the Labour Party have always believed lays behind crime, that is poverty and deprivation and so on. There is a very strong feeling that you have not done enough about that, that you didn't get to grips with that in time, and that you should have taken a more traditional approach to deal with poverty. PRESCOTT: That's an interesting point. Let's take ..... I've already claimed the progressive universalism that some areas of the greatest deprivation and all these high crimes, drug problems are concentrated in certain areas worse than others. For example there's one in my own area called Preston Road, and there are thirty-nine of them which we call the new deal areas to which we've given a billion pounds to improve, and some other areas under a new deal programme. What we've said there is that these are the areas that must have long-term investment. They've got the worst school educational attainment and standards, they've got the highest levels of unemployment, the highest levels of crime. So when David Blunkett and I visited the one on Saturday in my constituency, we were being told a number of facts. One is that in the last twelve months crime had gone down forty per cent. Why was that, and this has happened in a lot of the social exclusion areas, because the police have allocated certain police to work particularly in those communities, and there has been a welling of community feeling identified with police which has helped reduce crime. HUMPHRYS: Yes, but crime across the country, the crime that most (INTERRUPTION)......has gone up, and gone up scarily as far as ... PRESCOTT: I'm just trying to say to you is in these areas where we've identified the worst who are being left behind John, we've got to lift them up to the .... HUMPHRYS: Exactly, and let me say .... PRESCOTT: Secondly, you said nationally, we have reduced crime. If you take if from seventy-nine..... HUMPHRYS: Street crime..... PRESCOTT: Wait a minute, wait a minute - twenty per cent down on the British crime survey. Everybody agrees that, ....not disagrees, independent kind of report. Now in certain categories, let me take the violent crime that's talked about. We've seen some increase now, but since nineteen-ninety-seven we've had a reduction of violent crime, but it's starting to rise again, and that causes some concern, but don't forget it doubled under the Tories. We have actually reversed that increase. HUMPHRYS Alright, let's not go back to .... PRESCOTT: Now just let me take street crime, because that's an important point. In certain areas of London where certain tactics have been developed by the police and policies with the community we have seen reductions. In others there's an increase, and we have this business of mobile phones. I don't know if you are like me John, you get a mobile phone now - you said, well you can ring the moon, you can do anything with them, but you know, you can text message and God knows what else. It amazes me on technology somehow you can't prevent the phone being used when it's been stolen. We hear now they're going to do that, but when I went to National where the threat of the bomb a few years ago if you remember, cancelled the National, the whole mobile phones where cut off by the police, so the technology has been around for a while. So let us get on this crime thing technology and people who produce these units .....(INTERRUPTION)... to do something to... HUMPHRYS: ......the causes of crime, and that's what people were most concerned about. That's what you said you would do, and .... PRESCOTT: Well, let's get to that one. Why would anybody want to pinch a mobile phone. That's a cause. HUMPHRYS: Well, presumably they want to pinch it because they haven't got one of their own, or they want to flog it for a fiver to make a bit of money. But look, .... PRESCOTT: What would be the solution, give everybody a mobile call on the National Assistance? HUMPHRYS: No, no, the solution would be to deal with social deprivation in a way that you have not. Mo Mowlem again, let me give you another one, "my greatest regret, the failure to deliver to the people we were elected to help". And by that she means poor people, and if I quote you from the Rowntree - not alone in this - the Rowntree Trust, last - a very respected organisation, last December, "the number of people living on low incomes has remained largely unchanged since the early nineties. Nothing about the current dynamics of the British economy has been done that will help the government achieve its targets" Now an entirely independent body, very respected. PRESCOTT: ...Take the people in child poverty - right. It wasn't something when you lifted them out of these brackets, it wasn't - and you know you hear a lot of argument whether it's half a million or a million and a half, but many of the child benefits, credit things that were brought in to help child poverty, certainly have lifted a million and a half out. Now they're better off, it's not the same as it was. It doubled, child poverty or trebled under the Tories, so even comparing, .... HUMPHRYS: No, I'm sorry, .... PRESCOTT: It's not the same, it's not... and we are having an effect by the policies we're pursuing, so it's another one of daft Mo's statements (sic.) HUMPHRYS: Well, this is the Rowntree Trust that I quoted you there, but now what we're seeing, you see today it's been reported what Tony Blair wants to do is to take child benefit from the parents of kids who behave badly, which seems to many people to be a very odd thing to do, because these are the very children, presumably who are the most deprived in many cases anyway. They are the poorest families, and now we've got the Prime Minister saying, let's take money off them if they misbehave and the parents can't control them. That will add to add to their problems ... PRESCOTT: I don't think we should naturally assume that the poor people are less likely to want to... HUMPHRYS: I grant you that, but.... BOTH SPEAKING TOGETHER. PRESCOTT Secondly the business of whether it's in the Sunday Times, I don't know whether it's right... HUMPHRYS: It's in all the was briefed by Number Ten yesterday.. PRESCOTT: I can't necessarily accept that what they say in the Sunday Times is right, but let me just concentrate on the problem. HUMPHRYS: Do you think this is the right approach to take... PRESCOTT: David Blunkett and I went to a place in Preston on Saturday, Preston Road in my constituency. We were told by the police who are dealing with truancy that they were now getting successfully kids to go back to school, and they were quite happy about that, but what shocked them most of all was that two thirds of parents were with the children when they found them, either in town actually co-operating with their truancy. I believe the figures are as high as eighty per cent in some areas. It really isn't acceptable if we talk about rights and responsibilities for parents to be indifferent about whether their children...... HUMPHRYS: Absolutely but what I am asking you is it right to (both speaking at the same time) take money off parents because their kids behave badly. PRESCOTT: We don't know that that's a proposal. HUMPHRYS: But if it is and it's been briefed to every single newspaper in the land. PRESCOTT: John, you must allow me to answer it in my way, you keep coming back. There the moment it's an illegal act not to send your child to school, the parents have an obligation to send their child to school as I understand it. And there are a range of things that you can talk about as disincentives if you like, or to encourage those parents who appear to be indifferent as to whether their child goes to school, to ask them to face up to their responsibility and do that. I assume this must come from a range of areas of possible policies that you could take into account. HUMPHRYS: Do you think it's a good idea? PRESCOTT: I think we need to tackle the problem of youth in we tackle the truancy, if that's a possibility of how you might deal with it, I'd be prepared to consider it as a possibility. But let us see what the range of things are, what I am not in any doubt about and everybody is telling us, lots of youths in our towns are indifferent to any kind of order, many of them are acting in truancy that we must and have a responsibility to try to do something about that. And one of those is how do you correct truancy, how do you say to a parent, it's our responsibility to provide good education for our children, but it's your responsibility to see the child goes to school. Now, if the parents are totally indifferent to that, we have a law that says you should do that, if they're not, there may be a range of other measures that may have to take into account, to ask that parent to concentrate their mind to face up to their responsibility. HUMPHRYS: Let's look at the question of trust that I touched on earlier. You promised when you came in, Tony Blair promised that you would be purer than pure. People do not believe that you have cleaned up politics. Again in the survey sixty per cent say no to that, only seventy (sic) per cent say yes you have cleaned up politics. Now Peter Mandelson says what's needed is a bit more honesty on the part of the government. Do you accept that? PRESCOTT: What Peter Mandelson's statement? If you're asking me about the business of honesty in politics, we have made it more transparent now, in face we're getting into a lot of trouble at the moment, because everyone looks up now how much is given to the Labour Party, how much is given to political parties and makes an assumption that because they have got some connection in their business life there is automatic some kind of sleaze. HUMPHRYS: Mandelson talks about more, need for more honesty. PRESCOTT: Well I've always been for honesty in politics, sometimes you get accused of speaking out of turn and not controllable. Well I inherit that because I want to say what I believe and what I think because at the end of the day, you are only as good as your judgement, as good or bad as that is but as long as the public say, well I think the person believes that. So honesty and trust are absolutely critical in politics... HUMPHRYS: And you could do better in that regard? PRESCOTT: Well I think we can all do individually better. Myself, yourself and the press as well, because I mean the trust in the press has now gone down to twenty per cent I see in the poll... HUMPHRYS: ...and does that include Tony Blair because we heard him on Wednesday afternoon saying that we are going to stop crime effectively, get crime.. PRESCOTT: ..he didn't say that John. HUMPHRYS: Well let me give you the exact quote "we are confident we will have brought that problem" - meaning street crime in London "we will have brought that problem under control by September". Now the next day, I don't know what he meant to say, but the next day, his spin doctors were telling everybody, everybody, that he didn't actually mean that.... PRESCOTT:, no, let's just take the first statement.. HUMPHRYS: ..people think what's going on here? PRESCOTT: Let us take the first statement, this is a fair point. Under control, I assume that would mean you are not continuing to rise 'cause that's what's happening at the present time and it's beginning to fall. I mean that's reasonable....(both talking at the same time)'re a grammar school lad tell me whether it's reasonable or not. HUMPHRYS: Why did the spin doctors the next day have to correct what he said. PRESCOTT: I'm dealing with the statement of what he said, right, that is Tony Blair's own words and if he said that, then I think he said it in the House of Commons, I think it was at a time when exchanges with Duncan Smith, given those circumstances, what he has said is that he hopes that in September we will have some control. That may well be connected to the technology that we hear about that the industry is about to introduce on mobile phones, since thirty per cent of the effect on street crime is people stealing mobile phones, it is a major change in that. You could reasonably say it's going to fall, now it's reasonable to say that in the context of exchanges. Why now? But we must keep the trust and we will keep the trust of the people, we will keep on doing what we're doing, economic progress and social justice, it's characterised this government and we will continue with it. HUMPHRYS: John Prescott, thanks very much indeed for joining us this morning. HUMPHRYS: The Post Office is losing a fortune and not delivering the goods. It's in a mess. The postal services regulator (Postcomm) has an answer: open up the business to competition. The problem is that just about everybody thinks that's a terrible idea and could end up killing off the Post Office altogether. And whatever misfortunes may have befallen it over the past few years, it is still a much-loved institution. That's why Margaret Thatcher left it alone. As Paul Wilenius reports, the government has found itself in the middle of a storm and is desperately looking for a way out. PAUL WILENIUS: Everyone loves receiving a real letter. It's the Royal Mail that delivers them and the Post Office that starts them on their journey. This is the oldest Post Office building in the country, in the picture postcard village of Painswick in Gloucestershire. Sue Casey the local postwoman is out on her rounds delivering a little bit of morning sunshine. ACTUALITY WILENIUS: The Post Office and the Royal Mail are part of our national heritage. They're also part of Consignia and both are state owned. But now they're losing money and face a major threat to their survival. The fate of that much loved British public service - the Royal Mail - is turning into one of the most intractable problems for this Labour Government. Indeed, the latest proposals from the independent regulator Postcomm to fully open the postal market to private competition over the next few years, has sparked off widespread alarm. So much so that Ministers are now coming under intense pressure from unions and many Labour MPs to intervene openly and to either water down or delay those proposals. BILLY HAYES; It's a great irony that under a Labour Government you know we might see the destruction of the British Post Office. LINDSAY HOPYLE: The danger is that Postcomm could smash that brand and I think that's the real danger for the future of the Post Office, will it exist, will it be the love brand that we know and where does it all end? WILENIUS: Symbols are important to the British, no matter where they are in the kingdom. The Royal Mail is not just a symbol. Over many years a steady stream of profits were handed over to the government, amounting in total to billions of pounds. But in recent years profits have disappeared, to be replaced by mounting losses. JOHN WITTINGDALE: It is extraordinary. This is a business which only a few years ago was hugely profitable and in a short space of time its performance has deteriorated, it is now losing huge amounts of money, one and a half million pounds a day, at the same time that is has a monopoly and the amount of business that it is doing, the volume of mail has been increasing. It is extraordinary that any business can have performed so badly in such a short space of time. WILENIUS: The Post Office is now part of Consignia. It accepts that the position is perilous. It's trying to cut costs urgently. But at the moment the mail service is relying on handouts from the government, which are worth hundreds of millions of pounds a year. PETER CARR: The most important thing is to bring the expenses down. Last year expenses grew at 13%, whereas revenues only grew at 2.7% and clearly that is formula for loss and it's a formula for disaster. WILENIUS: The postal services regulator now wants thirty per cent of the market in bulk letter deliveries opened up within months. That's the recommendation of Postcomm Chairman Graham Corbett. But he also wants sixty per cent opened up in two years and a hundred per cent within four years, that's by 2006. This is Allan Leighton the Chairman of Consignia. He's been brought in from Asda to try to bear down on soaring costs. Although he's ready to face up to competition from private companies, he wants it to be at the same pace as the rest of Europe. He's concerned that the British regulator wants to push ahead with total liberalisation well before our European competitors. ALLAN LEIGHTON: The Postcomm pace for us is very difficult because, I mean it accelerates competition, it's competition which is faster than the rest of Europe and we just think that's basically unfair and you know, so we're holding our hands up saying you know, can we go at the same pace as everybody else, why do we need to go faster. CARR: What we've got now is an opportunity to bring in competition, almost immediately and what's most important, is that we know that by the end of 2006, we will have a fully liberalised market and that's what this industry needs. It needs certainty, it needs to know when things are going to happen and in order to do that, you must have an end date. WILENIUS: If the market is opened up it's private companies like DHL, owned by Deutsche Post, which want a large slice of Consignia's business. But others threatening the Royal Mail, including TNT and Business Post. But the Opposition feels competition will make letter delivery more efficient. WHITTINGDALE: If you look at the record in other utilities where competition has been introduced, the benefits to the consumer have been enormous and certainly I think that competition will act as a driver to improve efficiency and will result in a better standard of service for the consumer. WILENIUS: But lifting the Post Office's letter monopoly could mean the end for parts of Consignia. Already private companies like Hays, an express delivery expert, are making profits handling some mail for a hundred large firms. Now they want more access to some of the highly profitable bulk letter business. HOYLE: I think the private companies that want to enter into the market will have the ability to cherry pick because what we're not seeing is the service being opened up to fair competition, because I think that's important. People recognise and Europe says that we ought to have competition, but what we're not seeing is fair competition within the postal service. WILENIUS: Without the protection of the traditional letter monopoly enjoyed by the Royal Mail and the Post Office, Consignia would inevitably lose parts of its business to private companies. Indeed this could jeopardise the universal service it now provides. At the moment often uneconomic and expensive rural services are subsidised by the more profitable business generated by the big users. HOYLE: The one thing that people appreciate is wherever you live, it costs the same price to send a letter and to receive that letter. We know that the service is equal across the country and that's important. The moment that you begin to alter that and it' no use the Postcomm saying well, we have a universal agreement. The universal agreement is with the Post Office and Royal Mail only and unfortunately the same rules do not apply to those that will cherry pick the market and unfortunately, if you're losing money, that service cannot continue and something has to give. WILENIUS: It's not just rural services which could be at risk. This area of Gloucester depends on its local Post Office for access to services ranging from pensions and benefits to basic banking. But there are fears these sort of services across the country could be under threat from Consignia's plans to close 3,000 urban Post Offices in the near future. This Post Office has an important role to play in the community, as a social service as well as a postal service. Consignia says it needs to shed jobs and improve productivity to cut costs. But there are concerns that cutting the number of branches will undermine that valued social role. HAYES: The less outlets there are for any organisation whatever company, it means it's less of a recognised brand and so obviously the less postal outlets there are, the less likelihood is of people using that particular service and let's not forget also, urban post offices are also where pensioners, where you know disabled and the like people meet to collect their benefit, it's you know, something called society and that's what these branch offices are all about. WILENIUS: But perhaps the biggest problem of all for the government is Britain's love affair with the Royal Mail. The idea that the post will get through, even to the most far flung parts of the country, at the same price for all, is part of our heritage, part of our society. It's what millions of people have grown up to expect. ACTUALITY WILENIUS: It's the image immortalised in the 1930s documentary 'Nightmail'. Trade Unions and Labour MPs are now lining up with groups all over the country to oppose plans to introduce more competition into the post. There are signs that their campaign is having an effect on public opinion. A poll conducted by NOP for the Communication Workers Union officially released today, shows that most people are opposed to opening up the postal system to competition. When asked "Do you think the Royal Mail should have to compete with private firms for letter delivery, or not, seventy-five per cent said 'No' while twenty-five per cent said 'Yes.' And people in Scotland were even more concerned. There, eighty per cent said 'No' to competition. HAYES: Our polls show that seventy-five per cent of the people we polled believe the competition is not the solution to the problems the Post Office currently face. I think that's a commentary also on the idea of public services, it shows that people recognise the Post Office is a public service and competition is not the solution favoured by the vast majority of the British public. WILENIUS: But there's also mounting opposition on the Labour backbenches. More than one-hundred-and-fifty Labour MPs have signed up to a House of Commons motion calling on the government to protect postmen and rein back the regulator. An alliance of rural post users, unions and Labour MPs is mounting powerful opposition to his proposals. To say that Ministers are in a panic over the future of the Royal Mail is a bit of an understatement, because no matter what they do they'll have problems. If the Postcomm's proposals are watered down, they'll be attacked for buckling under union pressure. But if those plans go ahead unchanged, they'll stand accused of destroying one of the country's most cherished public institutions in Britain. KATE HOEY MP: I think it could be the ending of a great public service that has done this country proud for many, many, many years. I'm very worried indeed that the competition is going to be far too much of it, far too quickly. There is absolutely no reason why this country should be going ahead of the rest of Europe on competition and I just cannot understand how the regulator is being allowed to get away with what seems to me taking much more power than Parliament actually meant it to have. WILENIUS|: There could still be a deal. If so, it looks as though this will involve a delay in implementing the regulators' proposals and more financial help from the government to Consignia, as well as a rise in the cost of posting a letter. But any weakening of the Postcomm proposals would provoke allegations of government interference. CARR: We can see no argument for delay and we would be suspicious, that pressure that been applied, unfair pressure had been applied to the regulator, in making his judgements. He is an independent regulator and should not be subjected to political persuasion or pressure. WHITTINGDALE: Ministers have been interfering almost on a daily basis and the consequence is that the morale of the people who work in the Post Office has collapsed almost completely. They feel that they are being made to carry the can for the failures of ministers who have prevented them from taking the actions that are necessary. LEIGHTON: I don't think it's anything to do with the government Ministers, I mean this is the whole thing, I mean for us the most important thing is, we've got to do what we believe is commercially right for this organisation, and my role is to make sure that that is what happens. Now, I'm sure that we'll have a difference of opinion with elements of the government, with the regulator, with Postwatch and with everybody else who are involved here. The whole thing for me, which is the great thing about democracy, is you put your case and the people with the best case win the argument. WILENIUS: Ministers have been reluctant to go public with their views on the future of Consignia, although the government is the only shareholder. But senior Labour MPs are now urging the Trade and Industry Secretary to abandon this policy and put pressure on the regulator. HOEY: There's no point Patricia Hewitt continually passing the buck and saying this is now down to Postcomm. Ultimately, the government runs the Post Office, controls the Post Office and I think they have to now tackle this and actually go back to Postcomm and come back to Parliament if necessary to change the legislation, because we have gone too far on this and I'm afraid it is going to make us very, very unpopular, apart from it being actually wrong. HAYES: If you get it wrong on the Post Office people won't forget. People will remember the person that saved the Post Office, they'll never forget the person who destroyed the Post Office. If they backed the idea of a publicly owned Post Office they'll be rewarded at the ballot box at the next election. If the idea is that if it's the private sector alone can solve all the Post Office's problems then there will be a prize at the ballot box, but it will be a bitter fruit that they'll be picking up. WILENIUS: Like many governments before them, this Labour government wants to bring the Post Office and the Royal Mail into the frenetic hi-tech modern world. Postcomm's proposals have generated powerful opposition from unions and Labour MPs. But now the public has been shown to be against it, that might be decisive in persuading Ministers to protect the future of the public post. HUMPHRYS: Paul Wilenius reporting there. The Liberal Democrats were the only major party at the last two general elections to advocate raising taxes to spend more on public services. It gave them a nice distinctive appeal to the voters, their unique selling point, if you like. But now they've lost it. And that, as Terry Dignan explains, leaves them in a predicament. TERRY DIGNAN: Gordon Brown's Budget has given the Liberal Democrats a problem. Do they stick to their promise to tax and spend more than Labour? I've been checking out the On the Record tape library to find out why Matthew Taylor now faces a dilemma over his economic policy. Until Gordon Brown's budget the Lib Dems had a distinctive appeal. Unlike Labour they unashamedly espoused the virtues of higher taxation to spend more on health, education and other services. "We told you so." That was the Liberal Democrat response to the Chancellor's declaration that more money for the NHS made higher taxes unavoidable. But, said party leader Charles Kennedy, at least Labour, unlike the Conservatives, had seen the light. CHARLES KENNEDY: That is a clear ideological divide which now opens up in British politics between the Government and the Liberal Democrats on one side, and the incoherence of the Conservatives on the other. DIGNAN: Of course, the danger for the Liberal Democrats is that now they lose their distinctiveness. It's hardly an election winning slogan - 'Vote for us. We're just like Labour.' Yet a closer examination of the party's policies shows they still do have something different to say. They want to make all personal care for elderly people free. They want an extra two-thousand police officers. And look at their plans for education. They'd cut primary school classes to twenty-five and recruit an extra five-thousand secondary school teachers. They'd scrap university tuition fees and restore maintenance grants. The trouble is all this has got to be paid for and in the Commons Tony Blair has been mocking the Liberal Democrats' tendency to make new spending commitments at the drop of a hat. TONY BLAIR: "In the last week, they have called for over a billion pounds more on social services; more money for affordable housing; to fund research into a bovine tuberculosis vaccine; cuts in fuel duty; more money for transport; more NHS facilities in rural areas; seven hundred and fifty million pounds more for small businesses; more money for amateur sports clubs. I am sorry, but in the end, even for the Liberal Democrats, they have to realise cost can sometimes be an issue." DIGNAN: The Liberal Democrats will pay for their extra spending by raising income tax by one-p in the pound. According to their alternative budget, this will bring in an extra three-point-three billion pounds. There'd be a fifty per cent tax rate on those earning more than a hundred-thousand a year, bringing in four-point-four billion pounds. So Liberal Democrats will have to keep their fingers crossed that voters will happily go on paying higher taxes. Otherwise they're in danger of losing support - to the Conservatives. IAIN DUNCAN SMITH: "Because to listen to the Chancellor, one would think that this week, this is the first time he had ever raised taxes at all. But he spent the past five years and six Budgets raising taxes, and all the time public services are getting worse." DIGNAN: Yes, but suppose voters feel services have got a lot better by the time of the next election? In recent months On The Record has filmed at hospitals like Birmingham Heartlands where have improved already. If this becomes the norm, it means higher taxes have achieved their aim, perhaps making further rises unnecessary. So, that's the Lib Dem dilemma. By the time of the next election the case for higher taxes may have gone. Yet if the Liberal Democrats drop the idea, they lose the one thing that has made them distinctive. HUMPHRYS: Terry Dignan reporting there. JOHN HUMPHRYS: With me is the Liberal Democrat's Treasury Spokesman Matthew Taylor. Mr Taylor, are you still the party of tax and spend? MATTHEW TAYLOR MP: Well I think this week, we're not only the party that's been proved right on tax and spend, we're also the only party that's honest. A theme that didn't come out very strongly there but we did tell people before the election what needed to be done. We're glad to see Labour doing it on health. We're half-way through a process, the comprehensive spending review's not yet complete, we have to see what announcements are made there. We may see big improvements for education too as a result of this Budget. I hope so. In which case, no, we're not going to ask for tax increases that we don't need, we have some very big other things that we also want to say about how that money is spent, how people can be reconnected with those spending decisions and how the staff themselves can be freed up, so that they can actually deliver high quality healthcare and education without government interfering in day-to-day work which simply means a deterioration of standards. HUMPHRYS: So, you're a party of tax and spend where necessary? TAYLOR: Absolutely, and we've always said that. We've always said we will put... HUMPHRYS: ...nothing's changed then? I mean, just to be quite clear, nothing's changed? TAYLOR: We would put a penny on Income Tax to fund education improvements we said, if that's necessary. And as we looked at each Budget process, we did the calculations on what we wanted to spend and on what government money was available. Now at this moment in time, those education improvements haven't been made, you've just heard in the report, abolition of tuition fees, cutting secondary class sizes, dealing with the real problems of growing student debt which is deterring the poorest students from applying to go to university, which simply creates a block to opening up the divi..., removing the divides in society. But if the government delivers those, we're not going to ask for more money just for the sake of it. We never have. And let's be clear on the history of our party has been to be ahead of the game in saying where things need to go. We were the first to call for independence of the Bank of England. No-one now would say that was wrong. Yet both Labour and Conservative campaigned against us on it. We said that taxes needed to rise to put services right, Labour have finally acknowledged that and we may now see the improvements, but only if they're well spent and what we want to talk about is the way that that spending takes place, how we can decentralise in this country... HUMPHRYS: ...okay. TAYLOR: we can make those investments work. HUMPHRYS: But of course you've got to raise money in order to spend money, I mean, that we all know, the government's going to spend a lot more on health and you've said that you'd go along with that. Would you still spend more though, would you want to spend more on public services in the round than Labour is currently spending? That's the only question really isn't it? Given that we know what they're going to spend on, more or less. TAYLOR: Well, let's look back at that alternative budget that I presented... HUMPHRYS: I'd rather look forward... TAYLOR: ...well, let's test it against what he's up. He's put the money into health that we called for. It's taken a long time coming, but providing it's well spent, then we believe it can make the difference, we don't need therefore more money than they're spending, so long as they spend it well... HUMPHRYS: ...on health... TAYLOR: ...on education, those improvements still haven't been made, so at this moment we would need the money, but he's raised a lot of money, he hasn't announced how he's going to spend it. It's there for him. He said the comprehensive spending review will target education. Again, if he spends it well, then we might not need that money. On pensions, we said we wouldn't have the pension credit, we'd give pensioners rises on the basic state pension, particularly older and poorer pensioners and we'd still make that change because what we know about the Chancellor's pension credit is that one-and-a-half-million poorer pensioners who he says need this money, even on his own figures, won't claim it because they find it either too demeaning or too complicated. HUMPHRYS: Right, so there'd be some money involved in that obviously. And there are things that you want to spend money on that they do not intend to spend, for instance, tuition fees, that sort of thing, personal care to the elderly in nursing homes and all that. All of which costs a lot of money, you've already done that in Scotland, it's already been done in Scotland, you are prepared to raise the money in taxes to spend that additional money given that the government doesn't itself do it. TAYLOR: I think we'll probably have to raise much less money at the next election than we argued had to be raised at the last because the government will have gone a long way towards that. But if there is more money needed to be raised to improve the services in the way that we suggest, we will again be honest about it and I think it's one of the most important things that we've pledged to do, because if you see the breakdown in trust in politics, if you see the cynicism that now meets Labour announcements, because they've spun so many times, they've lied so many times about what they're doing and then they've cheated the electorate because I simply don't believe that this wasn't planned before the General Election. Did it come as a blinding flash of light just after the election they'd have to spend money? I don't think so. Why was it that in 1997 they said no National Insurance rises and at the last election they didn't, because they knew what they wanted to do, but weren't prepared.... HUMPHRYS: ..right, so... TAYLOR: ..and all of that is breaking the trust between people and politicians. So we will be straight with people, we will continue to do that, but we will go one step further. We're now exploring ways to give people greater control of how the money is spent. So for example on the Health Service, why not, instead of just hypothecating as it's called, earmarking a rise to the NHS, why not earmark a whole tax to the NHS and make sure that when people pay that tax, they know it will go to hospitals... HUMPHRYS: ...or schools? TAYLOR: ..if it changes, they know that will be an improvement for hospitals or cutback in hospitals. HUMPHRYS: Or schools maybe? TAYLOR: ...and perhaps the same for schools too... HUMPHRYS: So you might be prepared to say to people another penny on tax..that will go...the result of that tax rise, all of that money will go to schools, you'd be prepared to do something like that. TAYLOR: I would like to see local government given the freedom but also a fair tax system, Council Tax isn't fair enough to do this, but a fair tax system, maybe local income tax, and then able to take the choices about whether they make extra investment in their local schools. But I do believe this, if we are going to get services right in the future, we are going to have to give people more ownership in their own community of those institutions and the ability to take decisions on funding on them. Schools are primarily a local service so why not... HUMPHRYS: Precisely, but I mean you could ear-mark a certain amount of money that would go from central government, from the Exchequer to local authorities to be spent only on schools, an additional to the product of an penny extra on income taxes. You could do that and you'd be prepared to think about that? TAYLOR: I've already said publicly that I would like the party to look at the possibility of using a local income tax for funding local schools, that would mean a cut in National Income Tax, you'd transfer monies currently spent... HUMPHRYS: But, you'd need more money on education, you've just said that. TAYLOR: I'll come to that, first of all transfer money currently held nationally to locally and allow them to make those spending decisions locally, and then allow them to vary it, so that if you want to put more money into local schools and people are prepared to vote for you to do that, providing that local authority is properly accountable why not allow that to take place, just as we also need in the National Health Service to allow doctors and nurses far greater control delivering a front-line service. HUMPHRYS: You said you support Labour's budget broadly, but as far as national insurance increases concern for employers as opposed to employees, what about that, are you going to vote for that or against it? TAYLOR: We have two real problems with Labour on this one as being the honesty point. And second, why have they chosen national insurance rather than income tax, which is what we proposed. Because national insurance is a little less fair, the burdens fall more on the poor than on the rich, and it is also putting a burden through the employer's national insurance rise on business at a time when manufacturing is in sharp recession, and when manufacturing will be hit hardest. We won't block the money going in, we're not going to vote against the principle of that money going in,...(INTERRUPTION) .....we will propose changes to the National Insurance Bill that they will bring in, to bring it more in line with our proposals to remove the burden from manufacturing that will hit jobs, further... the sharp decline we're seeing in manufacturing we're seeing at the moment, and instead using public...(talking together).... HUMPHRYS: So here's this company that would have to pay five thousand quid in extra national insurance because it employs however many people. Would they have to pay that five thousand quid or not? TAYLOR; Under our proposals that we put forward in an alternative budget we would have raised basically the same money..... HUMPHRYS: Can I ask you what happens now, whether you are actually going to vote against that increase? TAYLOR: That's what I'm explaining. Our proposal was to put the new fifty per cent rate on income over a hundred thousand pounds, those lucky enough to earn that, and that would have raised basically the same money as the employers' national insurance rise. The difference is that it wouldn't hurt jobs. Well, what we can do is propose amendments to the Government's National Insurance Bill that will effectively replicate that so... HUMPHRYS: .....then what would he do? TAYLOR We're not going to block that money for the Health Service, because the primary issue is to get that money into the Health Service. We're not going to stand in the way of something that we've called for, for many years. We haven't done it in the best possible way, but we want to see that happen, and now we want to make sure it's well spent. HUMPHRYS So you don't like it but you'll allow it to happen. TAYLOR Well, the National Health Service is the primary important thing now, getting those doctors and nurses in, getting people treated. We hate the fact that Labour lied about this before the election. We hate ... we dislike the particular choice of the tax they've made, but it is close enough to what we've proposed that we're not going to stand in the way of it. HUMPHRYS: Matthew Taylor, many thanks. HUMPHRYS: And that's it for this week, don't forget about our website if you're on the Internet. See you at the same time next week and we'll know the results of the local elections by then of course. Good afternoon. 28 FoLdEd
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.