Interview with GORDON BROWN MP, Chancellor of the Exchequer.




 
 
 
 
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                                 ON THE RECORD 
                             GORDON BROWN INTERVIEW     
 
RECORDED FROM TRANSMISSION BBC ONE                               DATE:  8.11.98 
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JOHN HUMPHRYS:                         But first, the reason for being here in 
Eleven Downing Street, the home of the Chancellor Gordon Brown, he made his 
statement to the House last week about the prospects for the British economy 
and what that might mean for next year's Budget and he surprised most people by 
being optimistic.  He acknowledged that the economy will grow more slowly than  
he'd expected a few months ago, but we are not on the brink of a recession. 
Even so - things are going to get tougher.    
 
                                       Chancellor, how much tougher, how tough 
is it going to be?  
 
GORDON BROWN MP:                       Well I said that I was going to be 
realistic about the British economy and I also said there was a balance of 
risk. There have been events round the world over which we've got no control. 
There has been contagion from what has been happening in Asia and Russia to 
other parts of the globe. And at the same time, of course, the balance of risk 
means we've always got to be guarded about inflationary pressures which have 
been a cause of problems for the British economy.  So my forecasts are 
realistic but they are based on three things that we have done. First of all, 
we have got inflation to its target and created a new monetary framework with 
the independence of the Bank of England that is longterm and is credible. 
Secondly, we have tackled the public finance's deficit and we reduced it by 
twenty billions in the first year and eliminated it in the second year, the 
current deficit has been eliminated and therefore we have got the public 
finances in better shape.  And thirdly, because of that, we can see monetary 
and fiscal policy now working together.  And so as the world economy has turned 
down, it has been possible, where it wasn't possible in the early 1990s, or in 
previous downturns, for monetary policy to react as the Bank of England have 
done twice, and of course for public expenditure to rise next year. Now that's  
the result of the difficult and the hard decisions that we took immediately we 
came to power.  
 
HUMPHRYS:                              Nonetheless, you would acknowledge that 
there are tough times ahead for jobs and business. 
 
BROWN:                                 Well these are tough times because we 
are faced by a world downturn and we are trying to solve a particular problem 
that the British economy has had for years and that is being a stop-go economy. 
You see when we came into office, inflation was rising twice as high as our 
competitors, beyond four per cent, and that's why we had to take action to get 
the economy onto a sustainable path of growth.  And we did take that tough 
action as I've described it and we raised interest rates, we made the Bank of 
England independent and we cut the fiscal deficit, something people never said 
we would do.  
 
                                       Now, at the same time, we've got to 
create the conditions for growth and stability in the world economy now and 
when you have world growth rates halved, when you've got world trade growth cut 
by two-thirds, when of course you have got no growth at all in Japan and in 
Asia, you've got contraction of growth, then you are faced, for a trading 
nation like ours, with bigger problems than perhaps some other countries. Now 
we are facing both these problems and tackling them. But it's because we've put 
in place, and I would emphasis this, the longterm foundations for success, that 
I believe we can steer a course of stability through what are difficult times 
for both the world economy and for every individual economy as a result.  
 
HUMPHRYS:                              But in the shorter term, the medium 
term, there are going to be job losses, because as you say they are tough 
times.  
 
BROWN:                                 Well over the last eighteen months, 
there are four hundred thousand more jobs been created as a result of decisions 
we've taken. 
 
HUMPHRYS:                              And because the economy has been 
growing.  
 
BROWN:                                 And we've put in place the Welfare to 
World programme and there are a hundred and fifty thousand young people now 
benefitting from that. 
 
HUMPHRYS:                              That doesn't of course create jobs. 
 
BROWN:                                 Well, of course, it is creating jobs 
because employers - this is not simply a temporary scheme that young people are 
on for a few months.. 
 
HUMPHRYS:                              No, but it's not a job creation scheme 
is it, you've acknowledged that in the past. 
 
BROWN:                                 Yes, but John there are thirty thousand 
employers who've signed up to be part of this programme and they are looking 
for young people whom they can train and work with and of course if they are 
good, in most cases they will be considered for taking on and keeping on. I 
think it is very important to recognise that this Welfare to Work programme is 
quite different from temporary work and temporary training in the past because 
employers are directly involved in it. And it is for these reasons, plus the 
fact that there are to be ninety thousand more opportunties for the longterm 
unemployed, we've put in place a programme for disabled men and women wanting 
to get back into work, and for lone parents, but our Welfare to Work programme 
will be giving three hundred thousand people will have benefitted by the 
opportunties by next April.  So it's very important to put in context that in 
addition to creating this longterm framework for interest rate policy, and for 
our public finances, we've put in place this longterm programme of Welfare to 
Work and the signs are that it has worked to create large numbers of jobs and 
certainly large numbers of additional opportunties for people denied hope under 
the Conservatives.  
 
HUMPHRYS:                              So taking all of that into account, are 
you saying there will be no lost jobs, as a result of this slow down. 
 
BROWN:                                 You know that no Chancellor makes 
predictions.. 
 
HUMPHRYS:                              I'm not asking you to predict anything.. 
 
BROWN:                                 You are actually.   
 
HUMPHRYS:                              No, no, I'm saying to you.. 
 
BROWN:                                 You are asking me to make predictions.. 
 
HUMPHRYS:                              You acknowledge that there are tough 
times. I mean Tony Blair himself said, as you know on Friday 'there are tough 
times ahead for jobs and business'.  You acknowledge that.. 
 
BROWN:                                 And I said in my pre-Budget statement 
and that's why I say it was a realistic statement. I said no denial of 
short-term difficulties. There are pressures... 
 
HUMPHRYS:                              Which means lost jobs.. 
 
BROWN:                                 There are pressures, there are pressures 
on businesses and there are pressures on individual companies and individual 
sectors.  Some have been as a result of the Pound, some as a result of the 
collapse of trade to, to, to Asia, which has fallen by a half to four of the 
major countries we used to export to.  And of course there are pressures, but 
I'm not going to make predictions about unemployment.  I have said that these 
are difficult times for many companies, but of course you've got to see it in 
the context of four hundred thousand extra jobs since the election.  
 
HUMPHRYS:                              Yes, but you see this is the point.  
You, you, you, you claim credit for some of those four hundred thousand new 
jobs being created.  That is because the economy has been growing at an 
acceptable rate.  Well let me finish the question if I may. 
 
BROWN:                                 Which of, of which I am right to claim 
credit for the government introducing the Welfare to Work Programme.   
 
HUMPHRYS:                              I'm not disputing that .. 
 
BROWN:                                 Which our, which our opponents would 
abolish. 
 
HUMPHRYS:                              I am, I am, I've, I've allowed you to 
explain all of that .. 
 
BROWN:                                 Therefore I think you can acknowledge 
that there is some credit due for doing that, and that is not, that is, that is 
not .. 
 
HUMPRHYS:                              Just,just said, just acknowledged that. 
 
BROWN:                                 It shouldn't be a point of dispute. 
 
HUMPHRYS:                              I, I, no dispute over the - well there 
might be, but we're not going to enter into that at the moment.  What you've 
said is that we can claim credit for some of those four hundred thousand jobs 
being created.  Now they've been created during a period of growth, not 
staggeringly fast but - let me just finish this point.  If you're prepared to 
claim credit for that, and we're now entering a period of slow-down, tough 
times as you yourself say, then I'm not asking you to tell me how many jobs are 
going to be lost between now and next Thursday week or something - of course 
that would be, that would be very silly - chancellors don't do that kind of 
thing.  But you should at least surely, acknowledge that there will as a result 
of these tough times, be lost jobs, inevitably. 
 
BROWN:                                 Well, when I said, no denial of short 
term difficulties, I understood that some companies are having it difficult and 
it is a troubled time, but .. 
 
HUMPHRYS:                              Right, so there will be jobs lost? 
 
BROWN:                                 ,..you've got - but you've got to 
acknowledge also, that the Welfare to Work Programme, the new deal is actually 
moving into gear now.  There are more opportunities coming over the next six 
months and the next nine months .. 
 
HUMPHRYS:                              Fine, as you say. 
 
BROWN:                                 And they're coming you know, not just 
for the young people who are unemployed .. 
 
HUMPHRYS:                              No, no, you, you've made that point .. 
 
BROWN:                                 But I mean right across Europe, right 
across the globe. 
 
HUMPHRYS:                              You've made that point, but I just want 
to be quite clear, lest anybody is in any doubt about this, that when you talk 
about tough times,you acknowledge that there are bound to be jobs lost. 
 
BROWN:                                 No government, as I've said on so many 
times before, can guarantee that every job that exists at the moment, will 
always be in existence, but what we can do, and that's the point of the new 
deal, is say that where there have to be changes, then we will help people get 
the next job opportunity and that's why we've put in place a programme for 
companies who, where there are skill shortages, as well as the new deal, and 
that's why there are so many different measures to help with training people, 
who are looking for new job opportunities. 
 
                                       Now no government is going to give a 
guarantee in a global economy, that every company like Fujitsu or like Siemens 
or like Hyundai will always continue with the investment decisions they 
announce, when something happens in Asia or Korea or happens in Germany or 
Japan, but at the same time, what I can say, and this is the role of government 
in the modern world, we will help people be equipped to cope with the changes 
that, that happen, and help people master and surmount these changes by giving 
people both skills and opportunities.   
 
HUMPHRYS:                              Right. 
 
BROWN:                                 Now that is a proper definition of the 
role of government in a modern world. 
 
HUMPHRYS:                              Ok.  Let's, let's look at the forecast 
for growth, that, that, that you've been making.  You're talking about the 
economy growing by one to one and a half per cent next year and you're staking 
a lot on that forecast.  An awful lot of other people, very distinguished 
economists, are saying well actually no, that is very optimistic, and they're 
calling you Gambling Gordon.  They have a point don't they? 
 
BROWN:                                 No, I think our forecast is a realistic 
one, it's a central view and it's actually similar to the one that's come from 
the IMF, from the EEC, from the National Institute.  It's similar to the 
average of forecasters throughout the economy, which are predicting something 
like one point one, one point two per cent in the case of the National 
Institute, now .. 
 
HUMPHRYS:                              A bit out of date some of those aren't 
they?  They're, they're quite old some of them.  They're looking back a bit 
over the last three months. 
 
BROWN:                                 Well, well, I'll explain why it is the 
case that this forecast is one that has been made in the way it has.  We look 
back to the early 1990s.  Now what happened in the early 1990s, and why the 
economy turned down so much, was because interest rates had to remain above ten 
per cent for four years.  The public financers were not in a shape for the 
government to be able to invest as we are doing next April.  Monetary and 
fiscal policy could not work together, so at the very time the world was 
turning down, that government of the day had to keep interest rates for a year 
at fifteen per cent and for four years at ten per cent.  And equally they were 
unable to use the public investment that we are making, to help the economy 
grow.  
 
                                       Now it's because we took the action 
early on on inflation, and therefore we got our inflation target met and took 
the action on the public finances, that monetary and fiscal policy can work 
together, to react to the international conditions that exist.  Now of course, 
there is a balance of risk here.  And I was the first to say that, in the, in 
the House of Commons.  There's a balance of risk in relation to what's 
happening round the globe, where contagion is an issue and we've had to be very 
careful, and that's why we've got proposals for the reform and strengthening of 
the international financial system, but I hope we can discuss during the course 
of this interview, and that's why also of course we've got to be vigilant about 
inflationary pressures in the economy.   
 
                                       But the reason why the British economy 
is better equipped to cope with the difficulties than we've been in the past, 
is because of these big decisions that we made, right at the beginning of the 
government, which were to set, not a framework for a year, but to set a long 
term framework for the British economy, that I think most people have welcomed. 
 
HUMPHRYS:                              Yeah, but, but because of some of the 
uncertainties that you've pointed out there, you cannot be certain about this 
one to one and a half per cent can you?  I mean, the trouble is you see, that 
the trend of nearly all the forecasts, that have been made recently, has been 
downwards, rather than in line with yourself. 
 
BROWN:                                 I think .. 
 
HUMPRHYS:                              Every week we get a new forecast and 
every week it's worse than the one the week before, isn't it? 
 
BROWN:                                 Well, I ask you to look at - actually I 
think the last forecast to come out was the National Institute one, which is 
the one that I just mentioned, but I ask you to look at what the government has 
done and what we're doing, and I do not say, and I did not say in the House of 
Commons that I'm denying that there is a balance of risk because .... 
  
HUMPHRYS:                              Your one to one-and-a-half per cent may 
be wrong? 
 
BROWN:                                 No. But I said that in the House of 
Commons right at the beginning of my speech... 
 
HUMPHRYS:                              On the down side.... 
 
BROWN:                                 There is no denial of the short-term 
difficulties but I make, as every Chancellor has made, a forecast for this 
year, the next year and the year after that.  Now on the basis of our 
experience in tackling the problems at the beginning of the government, that is 
the realistic forecast that we're making, and I believe that because we tackled 
inflation and because we got the deficit down, monetary and fiscal policy can 
now work to the benefit of the economy in the year to come.  And of course if 
you were unable to reduce interest rates then of course, because of inflation, 
and you hadn't tackled it, that would mean that there was a difficulty.  Now, 
that's what happened to the last Conservative government in the early nineties. 
It happened to them in the early eighties as well.  Now, because we have 
tackled inflation we are in a better position, and that's why I say we are 
steering a course of stability in what is ... I have been involved in 
discussing these things round the world, what is a very troubled world. 
 
HUMPHRYS:                              Sure.  You said the Institute's was the 
latest.  In fact I think there have been some more recent than that. 
 
BROWN:                                 I think it was the last one before I 
made my statement. 
 
HUMPHRYS:                              Well, let me give you a couple because.. 
 
BROWN:                                 Of course we could get into an argument 
about who did what... 
 
HUMPHRYS:                              Oh sure, .. and that would be tedious, I 
quite agree.  But there was a poll of polls, wasn't there, a sort of survey of 
surveys if you like, and let me give you the one from the Centre for Economic 
and Business Research.  Now that's very recent.  That suggested a decline of 
five per cent, a cut of five per cent - of point five per cent in... 
 
BROWN:                                 They're suggesting a contraction of 
minus point five per cent. I think.... 
 
HUMPHRYS:                              Minus five per cent.  Even if you look 
at another, a terribly recent one, of the Economist's survey of GDP forecasts, 
that was Friday, just two days ago, that was only saying nought-point seven per 
cent.  So whichever one of the more recent ones, and this is my point, of the 
more recent ones that you look at, they are much less optimistic than yours 
was, hence the gambling charge. 
 
BROWN:                                 Well, I say what we say is realistic, 
and I've given you the reasons why it is the case.  The Treasury does publish 
and did publish an average of the forecasters, and I think it was... 
 
HUMPHRYS:                              A while back. 
 
BROWN:                                 .. and I think it was one-point-one per 
cent.  The National Institute I think came in at one-point-one to one-point two 
per cent, the European Commission about one-point-two per cent, the IMF... 
 
HUMPHRYS:                              All of those quite a ...... 
 
BROWN:                                 Well, you wait and see what the next set 
of forecasts are, but 
                                     
HUMPHRYS:                              I'm looking at the most recent here. 
 
BROWN:                                 The central issue is looking at what 
we've done.  You can discuss.... 
 
HUMPHRYS:                              Well, they've done that.  I mean these 
people have reached these forecasts themselves, that have done this survey, 
they've looked at what you've done and that's the conclusion they've come to.   
 
BROWN:                                 But it's very interesting.  Now, right 
at the beginning of the summer when I announced my spending plans for health 
and education, the issue was, was this spending too much or too little.  Then 
the issue in September was, was we borrowing too much and too little.  Because 
we've answered all these questions we are spending within the resources we 
have, we are borrowing prudently and people can see that, the issue has movedon 
to forecast - actually mainly forecast, not for this year but for next year or 
the year after, but I tell you to look at what we've actually done. 
 
HUMPHRYS:                              They've been doing that. 
 
BROWN:                                 We have cut the deficit and indeed 
eliminated the current structural deficit this year, and that has been very 
tough action to control public spending, that people said we couldn't do,and 
have done.  We have cut inflation... 
 
HUMPHRYS:                              I'm not arguing with any of that. 
 
BROWN:                                 We have cut inflation, we have cut 
inflation in a way that people did not expect us to do, by being very tough, 
with the independence of the Bank of England.  You've got a situation where 
unlike the previous downturns that have hit the British economy, the monetary 
policy and the fiscal policy can work together.  That means the Bank of England 
has been able to respond to the world conditions that exist and been actually 
to reduce interest rates twice.  Now, that couldn't have happened at the 
beginning of the nineteen-nineties, because the government of the day had to 
have interest rates at fifteen per cent. 
 
HUMPHRYS:                              As you said. 
 
BROWN:                                 For a year.  Interest rates at the 
moment are down from seven-and-a-quarter per cent to six-and-three-quarters per 
cent.  Now, that is a big difference between the situation we faced in the 
early nineties.... 
 
HUMPHRYS:                              So there is no chance, no chance of 
growth slowing by more than one per cent. 
 
BROWN:                                 I've said that our forecast is for a 
moderation of growth. 
 
HUMPHRYS:                              You said one-point-two to one-point-five 
per cent. 
 
BROWN:                                 We've given  - one to one-point-five per 
cent was what the forecast - that we gave, and that is the forecast that we 
have given, but I have also said as I continue to say, that there is a balance 
of risk in the world economy particular, and of course we cannot say what is 
going to happen in every continent, and what happened in Asia and the way there 
was contagiums to other continents affects a trading nation like ours, but on 
the best forecast that we can make the central view, that is our view for next 
year.  And the reason is, as I say, that we have taken the tough decisions 
early on to put us in a better position to cope with what I think everybody 
agrees are global difficulties affecting every continent and every country 
which are forcing everybody else to downgrade their growth forecasts.
             
HUMPHRYS:                              But what you're saying to me quite 
clearly is as result of all the things you've done in the last eighteen months, 
there is no possibility at all of a recession - none. 
 
BROWN:                                 What I'm saying is that our forecast is 
for a moderation of growth. 
 
HUMPHRYS:                              A slight slow down. 
 
BROWN:                                 What I'm also giving you is the reason 
why I believe that we have been able to make that forecast, and I don't think 
anybody can deny that the British economy having tackled inflation - you've got 
to remember that right throughout the last thirty or forty years our ability to 
maintain a low inflation level for a long period of time has always been at 
risk.  I think there were few people round the country that doubt now our 
determination to have a low level of inflation,.. 
 
HUMPHRYS:                              Yep. 
 
BROWN:                                 and to continue and to keep that 
inflation level low, and equally,  - that's why long term interest rates have 
come down from seven per cent to five per cent.  That's why the differential 
between us and Germany has narrowed by three-quarters of a per cent.  And
Germany traditionally regarded as a low inflation economy and the narrowing of 
the gap on long term interest rates between us and Germany is significant in 
itself... 
 
HUMPHRYS:                              Right, so what...                  
 
BROWN:                                 And because we made the tough decisions 
on public finances.  We are better placed to cope but of course we're in a 
global economy and we're subject to what happens in that global economy.  My 
objective is that Britain can steer a course of stability and that we can be 
more than equal... 
 
HUMPHRYS:                              Right. 
 
BROWN:                                 .. to any challenge the global 
economy offers us.
 
HUMPHRYS:                              That is your objective but are you 
entering a number of caveats at the end of that answer there, which suggest 
that the answer to the question - is there absolutely no chance of us going 
into recession - was in fact, if we can interpret the bit of that...well I 
think not, but it is possible, is that what you were saying? 
 
BROWN:                                 John, you ask me for what my forecast 
was.. 
 
HUMPHRYS:                              No, I asked you for your opinion, we've 
talked about the forecast.. 
 
BROWN:                                 I've given you my forecast, I've given 
you the reason for that forecast and I've also said that as in every economy, 
there is a balance of risk and the risk in this particular case, at this 
particular time, are risks of what is happening round the world. Now, nobody.. 
 
HUMPHRYS:                              When you talk about risk, let's be quite 
clear, you're talking about the downside risk, there is the possibility.. 
 
BROWN:                                 I think you will find from Alan 
Greenspan, the head of the Federal Reserve in the United States, to the Central 
Bank governors in Europe and Japan, there has been an anxiety that what 
happened in Asia could have a contagious effect elsewhere.  As it happens.. 
 
HUMPHRYS:                              Including here. 
 
BROWN:                                 Of course, and we are a trading nation 
that depends more on trade than America. It depends more on trade than the rest 
of Europe and we are bound to be effected if for example you've got a cut in 
your exports to Indonesia or Malaysia of fifty per cent, Korea of more than 
fifty per cent, the Philippines more than fifty in one year you are bound to 
be effected. And if of course Japan is not growing at all next year, is 
actually contracting by two and a half per cent this year, then the second 
largest economy in the world with which we've been trying to build up links is 
bound to have an effect on years, so there is bound to be a balance of risk. 
But you ask me what is our central forecast for next year and I give you it and 
I give you it for the reasons that I do, that we are in a better position to 
cope with these conditions than in previous times.  
 
HUMPHRYS:                              Right, but let me just return to it very 
briefly because you've said that this is our best forecast. However, you've 
also said things are going to get worse in the world, quite possibility, nobody 
can dispute that one way or the other, we don't know, the balance of risk is on 
the downside. So therefore, let me just return to the very simple question so 
that people watching this have no misunderstanding. You believe there is no 
possibility of a recession, or that given that things round the world are in a 
pretty dicky state one way or the other, it is possible that we could enter a 
recession.    
 
BROWN:                                 Our forecast is for a moderation of 
growth not the absence of growth..                                             
 
HUMPHRYS:                              But is it impossible that we could go 
into a recession... 
 
BROWN:                                 What I am saying, I actually said the 
balance of risk was on both sides. There is a balance of risk.. 
 
HUMPHRYS:                              Oh, so we might do better than you 
think... 
 
BROWN:                                 There is a balance of risk because of 
what is happening around the world, and of course there are always the problems 
of wage pressures in the British economy which could threaten a return to 
inflation and we've got to be vigilant about that as well and that's of course 
why the Bank of England and I, are always concerned to ensure that wage 
responsibility exists in the economy because when you have an inflation target 
that has got to be met, then wage irresponsibility can lead to higher interest 
rates.  So, we have got to be conscious of the balance of risk on both sides. 
But you ask me what is my central forecast, I've given it to the House of 
Commons as I am obliged to do, and it is right to do and I give it to you and I 
explain why it is the case that we have taken decisions that actually nobody 
expected us to take in the first eighteen months of our government and we have 
taken them and these are the right decisions for the longterm of Britain.  
 
HUMPHRYS:                              Right, let's move beyond this next year  
1999, and move into 2000.  Now there your forecast is that there is going to be 
quite a bounce back, instead of the economy growing between one and one and a 
half per cent it's going to grow between two and a quarter and two and three 
quarters per cent. In other words, if the economy is a ball and it drops down, 
it doesn't drop into the sand and sort of the soft sand and stick there, it 
bounces back pretty sharply. Now that's a bit optimistic isn't it.  
 
BROWN:                                 Well you've got to look at the economy 
as a whole and the economy as a whole is one that with these monetary policy 
changes and interest rates have come down twice, and with the public finances 
in a better state and with monetary and fiscal policy working together, and of 
course I may add working in a European context where Europe is the area of 
growth of the world economy over the next two years and that's of course why 
the forecast we make is as it is. 
 
HUMPHRYS:                              It puzzles me a bit and here's the 
reason. I came as you can see, equipped with some of your voluminous reports.. 
 
BROWN:                                 Very good reading. 
 
HUMPHRYS:                              Bedtime reading, absolutely, I read them 
all night.  Now, that's your pre-Budget report for November '97, you will 
recognise it. That is your pre-Budget report for '98, the last one, the one you 
did last week. Now in this one, the '97 one, you told us what you thought 
growth would be, in this one, the latest one last week, you told us what you 
thought growth would be and those figures are the same. Now, that - for the 
year 2000 of course, now that's odd isn't it because between November of this 
year and November of last year an awful lot of things have changed. Our economy 
has begun this process of slowing down, the world has changed as you have said, 
a quarter of the world in recession.  A lot of things have changed and yet your 
forecast for growth has stayed the same, now that is bizarre.  
 
BROWN:                                 Our forecast for growth for next year 
has come down.. 
 
HUMPHRYS:                              No, no for the year after, for the year 
2000 as I said, that's what's in these books. 
 
BROWN:                                 But the path of growth of course is 
changing because of what has happened in the world economy.. 
 
HUMPHRYS:                              The rate of growth you say has stayed 
the same. 
 
BROWN:                                 But the path of growth has changed John. 
You must understand that what is happening next year is because of the slowdown 
in the world economy, partly because of what has happened to world trade, 
partly because of what has happened to the value of the Stock Exchanges around 
the world, you know three trillion has been wiped off the Stock Exchanges. The 
path of growth has changed so there will be slower growth according to the 
forecast next year and then growth will return to its sustainable path as I 
would have thought you might expect it to do.  
 
HUMPHRYS:                              Well no, no I would have expected it 
actually to take a little while to recover. I'd have thought instead of the 
ball sort of going boing back up again, you now like Zebedee in Magic 
Roundabout or something, it might have (if you'll remember the Magic 
Roundabout) it might have just kind of taken a little while to get moving 
again, bearing in mind the shocks the economy has had to sustain.  
 
BROWN:                                 Well I described to you what is actually 
going to happen next year.  Interest rates which of course prevented growth 
returning .. 
 
HUMPHRYS:                              Ah, right. 
 
BROWN:                                 Interest rates of course which prevented 
growth returning in the early nineties, because they were at ten per cent and 
above for four years, have managed to come down twice.  Equally our fiscal 
policy, our public investment is working its way through, starting mainly from 
next April.  So in both cases, monetary and fiscal policy are working together 
at the right time and what some people call the automatic stabilisers are in 
place, for the economy.  And it's for these reasons, and particularly also I 
should mention this, what is happening in Europe itself, because although 
growth has been eliminated in Asia, and although also there is a prediction of 
growth slowing down in America, growth will slow down in the rest of Europe, 
but it will be higher than in other continents, next year and the year after, 
and of course with fifty per cent of our trade with Europe, it is bound to have 
a good effect on, on some of the figures that we're talking about. 
 
HUMPHRYS:                              So, so those figures then for the year 
2000, those assumptions of growth for the year 2000 are based on interest rates 
being cut and continuing to be cut? 
 
BROWN:                                 But John, interest rates have been cut.. 
 
HUMPHRYS:                              Yes, yes, I take the point, but they are 
going to be - absolutely, you made that point very clearly.  But they're going 
to.... 
 
BROWN:                                 ...they have been, they have - I don't, 
I don't, I don't make .. I don't make predictions about .. 
 
HUMPHRYS:                              I know you don't - I knew you - how did 
I know you were going to say that? 
 
BROWN:                                 And of course you would want me to, to 
stand up for what I want to be the case, that the Bank of England is 
independent to make its decisions.  But interest rates have been cut.  I ask 
you to look at what has actually happened, and interest rates which were 
fifteen per cent in the last down turn, have fallen from seven and a half per 
cent, to seven and a quarter per cent, to six and three quarter per cent, and 
of course that is one factor you've got to take into account. 
 
HUMPHRYS:                              Indeed and if growth is going to bounce 
back, the way you hope and pray that it will, then they are going, those 
interest rates are going to have to continue to come down, otherwise poor old 
Zeebedee is going to lay flat on his back, isn't it? 
 
BROWN:                                 Well that's a matter for the Bank of 
England, and they .. 
 
HUMPHRYS:                              Of course it is, but I'm just making an 
obvious, drawing an obvious conclusion. You see, you said to me .. 
 
BROWN:                                 That is a matter for the Bank of 
England, and if I may say so, if I may say so, compare fifteen per cent at the 
beginning of the nineties, with what was seven and a half per cent, then seven 
and a quarter per cent and then six and three quarter per cent. Now it's 
precisely because we're in a different situation from the end of the nineties, 
that I think people can be more optimistic about the, about the progress of the 
British economy. 
 
HUMPHRYS:                              So we could have the sort of growth that 
you anticipate, this great bounce back, with interest rates staying where they 
are today, without any more cuts? 
 
BROWN:                                 Well of course this is a matter for the 
Bank of England.  I only, I only .. 
 
HUMPHRYS:                              No, no, the answer to that question 
isn't a matter for the Bank of England, the decision is a matter for the Bank 
of England but you base your forecasts on something clearly, and what I'm 
suggesting to you is, that you cannot possibly, I would have thought, certainly 
nobody else is making this assumption, to whom I've talked, over the last 
weeks, you cannot possibly believe that you will get that rate, that degree of 
bounce back so the economy will all of a sudden go boing again like old 
Zebedee without further cuts in interest rates, otherwise it just wouldn't 
happen, would it? 
 
BROWN:                                 I think John, you're getting a bit 
excited.  I mean we're talking about .. 
 
HUMPHRYS:                              Interested, interested. 
 
BROWN:                                 We're talking about one to one and a 
half per cent growth next year that you say is over .. 
 
HUMPHRYS:                              Yeah and then double it the following 
year. 
 
BROWN:                                 But you want to claim is over 
optimistic.  If I just say to you in the early eighties and the early nineties, 
when the economies were moving back from a down turn, from the worst point of 
their cycle, I think they rose by two per cent in the first year in the 
1980s and by three per cent in the first year in the 1990s.  We're predicting 
that it would be something in the order of one and a half per cent.  Now I 
don't think that is wholly unrealistic.   
 
HUMPHRYS:                              No, but then you're telling me that it's 
going to double.   
 
BROWN:                                 I don't think that's wholly unrealistic  
at all.  
 
HUMPHRYS:                              You're going to, that that rate is going 
to double the year after, notwithstanding there may be still all sorts of 
problems. 
 
BROWN:                                 Hold on, John I think you should get 
your figures right.  It's one to one and a half is the forecast for .. 
 
HUMPHRYS:                              For 1999. Yes.
 
BROWN:                                 Which you say is over optimistic.. 
 
HUMPHRYS:                              Others say.   I have no views on this 
matter as you know. 
 
BROWN:                                 Which you say..suggesting is over 
optimistic and then it's two and a quarter to two and three quarter .. 
 
HUMPHRYS:                              To two and three quarter per cent, yeah. 
 
BROWN:                                 I am just making the point, that in the 
years coming out of a down turn in the 1980s and the early 1990s, the growth 
was higher in the first year out and I think it is not an unrealistic 
assumption, but you must come back again to what we have done, and what we have 
done is created a long term framework for this country, within which it 
is now possible to have an in-built capacity to respond to difficulties as they 
arise.   
 
                                       If the Bank of England is able to reduce 
interest rates, as a result of what is happening round the world, it is 
because we have tackled the inflationary problem that we inherited.  And if we 
are able to respond in public investment, from the beginning of next year, it 
is because we have taken action to get rid of the deficit that we inherited.  
And if monetary and fiscal policy can work together, then that is to the 
benefit obviously of the British economy. 
 
HUMPHRYS:                              You're going to get it right.  You're 
confident, naturally that you're going to get it right and we will have this 
recovery in the year 2000. So in other words, we're going to meet the economic 
condtions that you set out, just a little bit over a year ago, as having to be 
met, if we were going to sign up to economic and monetary union.  You're 
confident that that is going to happen? 
 
BROWN:                                 Well, well hold on.  We meet the 
Maastricht conditions at the moment .. 
 
HUMPHRYS:                              Sure. 
 
BROWN:                                 ..in terms of public spending, ..  
 
HUMPHRYS:                              Indeed. 
 
BROWN:                                 ..in terms of borrowing, in terms of 
inflation. 
 
HUMPHRYS:                              But all the other conditions that you 
put there, flexibility and jobs and getting the cycles, economic cycles in 
synch and all that. 
 
BROWN:                                 There are five economic tests and 
they've all got to be met and the five economic tests involve the effect on 
jobs, the effect on investment, the effect on the financial services.  They 
involve also the effect, if you like, from the economic cycle which has got to 
be judged, and they must involve the degree of flexibility that enables you to 
cope with the wage, or with shocks round any economy that is as big as the 
European Union.  Now these are five tests.  
 
                                       We have also of course, got to make the 
preparations that are necessary for a decision to be able to be made and of 
course when we came into government, no preparations were being made 
whatsoever, either for the Euro, or of course, for joining economic and 
monetary union.  So these are all issues, and that's why I think it's a 
realistic position to say, as I've said before, that these five tests will be 
assessed, probably at the beginning of the next parliament and there 
will be a triple lock for the British people, that is subject to a decision of 
government, a decision of parliament and a decision eventually of the British 
people.     
 
                                       When I spoke to the CBI on Monday, the 
first thing I actually said about the Euro to them, was that I was repeating 
that the policy that we decided on last October, that I announced to the House 
of Commons, is the policy at the moment, that is our policy. 
 
HUMPHRYS:                              Are you a bit more confident now than 
you were a year ago when you made that statement, that we will meet those 
conditions?  
 
BROWN:                                 Well we've got to look at them at the 
right time and.. 
 
HUMPHRYS:                              But as things stand? 
 
BROWN:                                 You've got to continue to assess the 
structural and cyclical factors.  You've got to look at the flexibility and 
you've got you assess whether your level of preparations is right. And as I 
say, the policy is as it will remain throughout the Parliament, the one that 
was set out last October.  
 
HUMPHRYS:                              So, you are saying when we meet the 
conditions, then we will have the referendum as to whether we go into economic
and monetary union.  
 
BROWN:                                 What I am saying is that when it comes 
to the next Parliament and this is the most realistic position, we will look at 
these five tests and assess how they have been met and if we believe that they 
have been met, then it is up to the government to decide one, to put it to 
Parliament and then to put it to a referendum. But of course that depends on 
the next General Election, it depends on a number of other.. 
 
HUMPHRYS:                              It might happen before the next General 
Election, mightn't it.. 
 
BROWN:                                 .. factors. Well I think you read my 
statement in the house of Commons a year ago, and it said that it was realistic 
to assume that that would be in the next Parliament.  
 
HUMPHRYS:                              But surely it's when we meet these 
conditions. You don't believe these conditions will not be met, do you? 
 
BROWN:                                 Well you've got to assess them, haven't  
you and it's important that we make the right decision, as I said, on national 
economic interest grounds.  You see the Conservative Party would make it on 
ideological grounds, other people would just jump in tomorrow because they 
think it is right in principle. I've said and I think it's right and it's a 
sensible view and I think it's gaining support with the British public, but 
there are five economic tests, they are economic tests that sum up the national 
economic interest for Britain in this matter and we will have to see these 
tests met before we make a decision. 
 
HUMPHRYS:                              Right, but I mean you are not operating 
on the assumption that it's possible we will not meet those conditions are 
you?   
 
BROWN:                                 That is what the tests are about. You 
have got to decide whether you can meet them or not and it's what the 
preparation is about. You have got to decide that we have actually looked at 
all issues that are involved in this before you make a decision. If you say the 
decision is on economic grounds and it's going to be made on the basis of these 
tests, you don't jump in and say that you have already made the decision. 
 
HUMPHRYS:                              So it's possible we might never meet 
them. I mean that is a possibility. 
 
BROWN:                                 It is something for the government in 
the next Parliament to look at. These economic tests, I think they are the 
right economic tests. I notice you are not getting into the argument about the 
individual economic tests, but these I think are the right economic tests, but 
you have got to be properly prepared as well. And, you know, we have got a 
Small Business Information campaign at the moment, to help small businesses, 
alert themselves to the Euro, and the first stage is to be ready for the Euro 
when it comes to mainland Europe on the First of January 1999 and the second 
stage is of course to look at the tests and to see whether they are met. This 
is an issue which will come down to practical, economic commonsense. 
 
HUMPHRYS:                              Indeed, and if you are arguing, if you 
are saying when rather than if, as far as economic conditions are concerned, 
isn't it a bit odd that you, who principally, in principle in favour of signing 
up to the Euro, isn't it a bit odd that you are not out there arguing for us 
going in, since that's what you believe in as a matter of principle. 
 
BROWN:                                 I'm arguing for the country to make a 
decision on the basis of these economic tests.  
 
HUMPHRYS:                              Yes but in principle you believe in 
economic and monetary union, you've never hidden that. 
 
BROWN:                                 Go back to the statement last October 
which hasn't changed, the policy of the government is as set out in that 
statement. Any suggestion that there's been any change in policy is quite 
ridiculous and the policy set out there is that we did see advantages in 
principle in being in a single currency but we felt that the decision should be 
based on applying the economic tests that we had set down and then making a 
considered judgement and we felt that the realistic time to make that would 
almost certainly be at the beginning of the next Parliament and it would be 
subject to a decision of the British people. I don't think anything can be more 
straightforward than that. The five economic tests but a decision if it were to 
be made, a decision of the British people. 
 
HUMPHRYS:                              In the closing minutes, can I talk about 
what's happening in Central America in relation to debt relief. Now, is it, in 
your view, irrelevant whether we release those countries from the debt that 
they are owing those and others countries of course, or should we be doing more 
about debt relief than we are currently doing.  
 
BROWN:                                 Clare Short has been exactly right, the 
first thing to do is to get emergency aid and to make that that aid is properly 
delivered to the people who need it.  The second thing will be dealing with 
disease, the third thing is to re-build the economies and help re-build that 
infrastructure through assistance that must come, in my view, first of all 
through the International Community having an emergency help - I believe a new 
facility for countries that have faced a huge breakdown as a result of national 
disasters must now be created.. 
 
HUMPHRYS:                              That's something quite new. 
 
BROWN:                                 Yes, and I believe that there will be 
support from other countries and in the European Union for contributing to that 
facility and I also believe that part of that could be a moratorium on debt 
relief for countries that are part of the HIPC Initiative as two of the 
countries affected... 
 
HUMPHRYS:                              And that should happen now. 
 
BROWN:                                 I believe we should make progress 
immediately on this because the re-building of these economies and their 
infrastructure will have to happen soon and I believe an international effort 
involving many of the countries that are leaders around the world with this new 
facility for post-catastrophe which is essentially what we are trying to do, to 
deal with countries where economies have broken down as a result of natural 
disasters, it is something to which Britain and other countries will want to 
contribute and side by side with that I think we can make arrangements in 
relation to debt relief.  The important thing is that the International 
Community understands this. As Clare has been saying all along that this is a 
natural disaster, immediate help is needed, we will need to help with disease 
but we will need also, as Clare has said, to help with re-building the economy. 
 
HUMPHRYS:                              A final quick thought if I may about a 
colleague of yours in the Cabinet Nick Brown who is all over the papers this 
morning because he has been outed, if that's the right word, as being gay. 
 
BROWN:                                 I think most people understand this to 
be a personal issue and a private issue and think they will applaud the way 
that Nick Brown has dealt with these matters with dignity and I think it is 
true to say that he has support - not just in the Cabinet and from the Prime 
Minister personally, but support right across the Labour Party - indeed I think 
right across Parliament. 
 
HUMPHRYS:                              Chancellor, many thanks. 
 
 
 
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