Interview with John MacGregor




       
       
       
 
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                                ON THE RECORD       
                           JOHN MACGREGOR INTERVIEW
 
RECORDED FROM TRANSMISSION: BBC-1                              DATE: 11.10.92 
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JONATHAN DIMBLEBY:                     Secretary of State, the debate, a great 
deal of the debate about what happens now in the context of Black Wednesday is 
about ERM, attitudes towards the ERM, when we should go back in, whether we 
should go back in.  Now, they say that one of the reasons why you're tipped as 
the next Chancellor is that you are agnostic about the ERM - are you? 
 
JOHN MACGREGOR MP:                     Well first of all forget the point about 
being tipped as the next Chancellor, I've got a big job of work to do at 
Transport.  As far as the ERM is concerned, I've always made my position clear, 
I was a strong advocate of going in, not least because I spend a great deal of 
my time with industry and commerce and industry and commerce you will remember 
were those who wanted the currency stability we got from the ERM.  And, also, 
because it was undoubtedly a great help in bearing down on inflation. So I was 
a strong advocate.   
 
                                       I don't think that the Chancellor had 
any other choice but to pull out in the wake of the huge currency inflows, 
quite around the world that we were seeing - the attacks on one currency after 
the other, quite unprecedented.  But I do feel that once we have sorted out 
what needs to be done to produce an ERM or a post ERM that will assist the 
Community in dealing with those currency flows, then we should be back in it.  
 
DIMBLEBY:                              Are you with Mr Clarke.  He said on this 
programme last week that it was a disastrous set-back, although he gave exactly 
the same interpretation of events as you....had to leave. 
 
MACGREGOR:                             I certainly think it was a great pity, 
but you will know of course that one other country has come out of the ERM, 
another has re-introduced foreign exchange controls.  So it's by no means only 
ourselves.  I mean, France very nearly, I think France was fortunate in coming 
at the end of all of this, France very nearly...the French Franc very nearly 
got into real difficulties.  So there's no doubt that there are now strains 
within the ERM because of the huge amount of currency that can move around the 
world. 
 
DIMBLEBY:                              Would you be in favour, not only of 
going back in when those conditions that have been suggested are in place, but 
doing that straight away, as soon as they are in place? 
 
MACGREGOR;                             No.  I think Norman Lamont is right that 
it will take some time before the conditions are right and one of the issues, I 
mean, we have an awful habit in this country of focusing only on our own 
internal domestic situation.  One of the issues undoubtedly is the costs to the 
German economy of dealing with reunification which are going to be colossal and 
of course one of the factors that really pushed German interest rates up and 
caused some of the strains.  Now, that was unpredicted really three or four 
years ago when the main argument was going on about the ERM. 
 
DIMBLEBY:                              I understand that but.. 
 
MACGREGOR:                             And I think that will take some time to 
work itself through. 
 
DIMBLEBY:                              I understand that it may take time.  My 
question is: would you go back in AS SOON AS the conditions are right and do 
you hope that those conditions will be reached sooner rather than later? 
 
MACGREGOR:                             I think it will be some what of a 
different form of ERM because discussions are now going on and I think they 
will take some time to see how you actually can have an ERM that can cope with  
the kind of turbulence that we saw a few weeks ago.  So I think that will take 
some time.  But, yes, as a long term aim, as a long to medium term aim, I would 
be in favour of Britain re-joining, very clearly.  But I do not myself believe 
that that's a pre-cursor to an economic and monetary union.  I think that's 
going to take..I mean, I think that's not an issue for this decade. 
 
DIMBLEBY:                              I wasn't even going to pursue down that 
territory but you would be in favour of going back into the ERM, you'd 
prefer to be in the ERM if the conditions are right. 
 
MACGREGOR:                             If the conditions are right.  
 
DIMBLEBY:                              And when they're right, and you hope 
they will be right, you will be saying "yes, let's go back in". 
 
MACGREGOR:                             And the reason for that is quite simple, 
that the vast majority of British industry and commerce knows that it's in our 
interests.  It was they who were pressing for it and they who still hope - I 
think most of them recognise that the Chancellor was right - but they still 
hope that it will be possible to re-join something of that sort.  
 
DIMBLEBY:                              Meanwhile, we're outside, without that, 
the discipline.  "Cobbling together" is the phrase most economists are using, a 
strategy which makes - may I put it to you - that makes all those fine words 
about conquering inflation sound now, like so much hot air. 
 
MACGREGOR:                             But I think this is so much nonsense, 
this "cobbling together".  I mean it's taken other governments and previous 
Chancellors some time to formulate the complete strategy and I'll give you some 
of the reasons, that some of the decisions that have to be taken couldn't be 
taken before the Party Conference and before his speech.  But let me just 
outline them, I think he's been absolutely clear about our determination to 
deal with inflation, he has got interest rates down again, we're now down from 
fifteen to nine per cent.  I think one of the reasons why that's now yet having 
its full effect on the economy is the huge debt overhang that there are...that 
there is for many people in many companies.  We have.. 
 
DIMBLEBY:                              Those people who have borrowed very, 
very heavily, borrowed and now want to lower that level of borrowing rather 
than spending. 
 
MACGREGOR:                             I actually believe that this is 
different from previous recessions for that reason, that there are a lot of 
people who borrowed very heavily in '87 and '88 and a lot of companies and that 
has caused their determination to save or repay debt and that is undoubtedly a 
major factor in my view in why we haven't moved more earlier and is the reason 
why you can't be certain exactly when interest rates will bring about the 
change.  But there are other things too Jonathan, I mean public expenditure, 
we've made our position very clear on that, but the Chancellor has to go 
through all the detailed discussions that we're having at the moment and will 
make that..the outcome clear in his autumn statement. 
 
DIMBLEBY:                              Okay. 
 
MACGREGOR:                             In the usual way.  Public sector pay 
we've been very clear about.  The anxiety to achieve a successful outcome of 
GATT, we have a substantial capital infrastructure spending going on at the 
moment, our industry is much more competitive.  There are a lot of issues 
there that are already in place.  
 
DIMBLEBY:                              All those things take time, one or two 
of these things we're going to return to very soon.  But meanwhile, you say the 
Chancellor made it very clear, his attitude to inflation, I seem to remember 
that just before Black Wednesday the goal was zero inflation, now the goalposts 
have shifted, it's no longer zero inflation, it's between one and four, maybe 
two if we can get there. 
 
MACGREGOR:                             But it still keeps us at the real goal 
and the real goal is to have our inflation in line with our major competitors.  
We achieved a lot of progress in doing that throughout nine out of the ten 
years of the eighties.  We have now seen a considerable success in coming down 
from eleven per cent to below four per cent and we must maintain that and I 
believe that's absolutely vital because if your inflation is out of line with 
your major competitors you become uncompetitive. 
 
DIMBLEBY:                              But you're a man of clear economic 
vision, you would recognise the distinction between the goal of zero inflation 
and the goal of low inflation? 
 
MACGREGOR:                             But I would also say that the goal of 
inflation we're setting ourselves is better than the achievements we've had 
over the years and in particular in the seventies and it remains an absolutely 
vital goal. 
 
DIMBLEBY:                              Absolutely but let's just be very clear 
about this, the goal..it's better than.  What you're saying is before we were 
after zero inflation, we didn't want to get pregnant at all, now we're after 
low inflation, a little bit of pregnancy is what we've got but that's better 
than an awful lot of pregnancy. 
 
MACGREGOR:                             I don't know how you make the analogy 
carry on but I think our level of pregnancy ought to be seen..(both talking at 
once)...as other people who are pregnant if I can put it that way. 
 
DIMBLEBY:                              John Major reiterated in that CBI speech 
in Scotland "I want to see zero inflation, low inflation is not enough" he 
said.  Now, if low inflation was not enough before Black Wednesday, why is low 
inflation quite enough now? 
 
MACGREGOR:                             Because I think it's a realistic target 
to set ourselves in the current situation and it is still extremely important 
that we hold to it. 
 
DIMBLEBY:                              But of course you say it's important to 
hold to it, but what you've actually done is got a nice little get-out clause - 
it may go up a little bit from time to time. 
 
MACGREGOR:                             Because of movements and international 
prices.. 
 
DIMBLEBY:                              Circumstances beyond our control, we've 
been there before haven't we too? 
 
MACGREGOR:                             But I think that's realistic but 
nevertheless the target is clear and let's be clear about this, in terms of 
interest rates.  I think one of the inter-relationships between interest rates 
and the position in the exchange rate is that as we know there can be, 
particulary in periods of substantial growth, a real inflationary effect of a 
falling exchange rate.  Now, the Chancellor has to make judgements all the time 
between interest rates and exchange rates in order to ensure that that doesn't 
happen. 
 
DIMBLEBY:                              And I want to pick up on that in just a 
moment too, but on this particular point, can you tell me what the Chancellor 
would say when we get up to as some predict five or six per cent - I'm not 
saying you will - do you then say "we've been blown off course a little, or 
it's a blip". What do we call it when we got up above the four per cent which 
is the top end of target? 
 
MACGREGOR:                             Well if you're talking four point one or 
four point two, it can be a blip but I think we've got to do everything.. 
 
DIMBLEBY:                              If it's five or six what is it then? 
 
MACGREGOR:                             Everything possible.. 
 
DIMBLEBY:                              What is it when it's five or six.. 
 
MACGREGOR:                             Everything possible within the terms of 
the policy instruments that you have available to you to avoid that. 
 
DIMBLEBY:                              Of course, but as Mr Lamont said "we 
have to acknowledge that we may go temporarily outside that range".  What is it 
if it gets to five or six per cent which the markets, some of them are saying, 
is going to happen? 
 
MACGREGOR:                             If that happens and as you rightly say 
it's entirely hypothetical and you're got to take action to deal with it. 
 
DIMBLEBY:                              And is that being blown off course, or a 
blip, when it reaches that level? 
 
MACGREGOR:                             I think you're being extremely 
hypothetical now.  
 
DIMBLEBY:                              Okay.  You said, and I just want to 
clarify finally on this point, in general, moving the target from zero to low
would you describe that as the end of a dream or the rebirth of reality? 
 
MACGREGOR:                             I've actually always thought that the 
most important point is to get inflation down to the level of our major 
competitors and keep it there and that's what that target range should enable 
us to do. 
 
DIMBLEBY:                              Now, I want to put a proposition to you 
if I may, it's this: that what you're really saying, what's really going on 
here, despite the words is - that given the depth of the recession and to 
re-formulate a familiar phrase, what you're really saying is - inflation now, 
in these circumstances, a little bit of it, is a price well worth paying? 
 
MACGREGOR:                             I know that there are some people, 
particulary those who've got themselves locked into a heavy debt situation, who 
would argue for that and there are some who would argue that that would enable 
house prices to start moving again and so on.  But I think that's a very 
short sighted view.  I think the crucial thing is to maintain the attack on 
inflation because experience over most of my political lifetime has shown that 
when our inflation is well above our competitors our economy suffers. 
 
DIMBLEBY:                              But you have, at the moment, a 
devaluation, depending where you go from, ten per cent upwards, you have a cut 
in interest rates and you have a projected, statistically projected increase in 
public spending.  Now, that may be very desirable in the way that you've just 
described but let me suggest to you that by your own lights this is an 
incredible way of saying "we're going to bear down on inflation". 
 
MACGREGOR:                             Well we still have interest rates at 
nine per cent and we have seen movements in the exchange rate up as well as 
down.  I notice that usually the attention is when it goes down and not too 
much when they go up, the position of the Deutschmark has improved considerably 
during the week of the Conservative Party Conference.... 
 
DIMBLEBY:                              What I think one economist..(both 
talking at once)...it goes down, then it goes boom and falls down again. 
 
MACGREGOR:                             He likes it when it goes down but 
doesn't like it so much when it goes up.  But I think the important..there are 
two points I would make here, in terms of import prices the exchange rate 
against the dollar is an important one, now the dollar was very weak in August 
and I think that the pound..our dollar exchange rate then was unrealistic but 
it's now back at levels that it's been for some considerable time.  The second 
point I wish to make is that there are a lot of pressures in the economy at the 
moment pressing downward on prices and so, whereas if we were in a high growth 
situation you would be right in saying that a falling pound against the dollar 
has real inflationary pressures built in, I don't think that's there at the 
moment. 
 
DIMBLEBY:                              But you would be with Ken Clarke and 
Michael Heseltine and, indeed, in that film Judith Chaplin, very concerned to 
ensure that those inflationary pressures of devaluation aren't allowed to feed 
into the economy because the real risk of that has to be there because it's 
biult in. 
 
MACGREFOR:                             Absoltely correct.  
 
DIMBLEBY:                              And would you also say therefore that 
those who look forward to early deep cuts in interest rates in your judgement - 
whether they're right or wrong is another matter - in your judgement are out to 
lunch economically doesn't  
                                 
MACGREGOR:                             Well I think there was a sort of 
euphoria among those who were against the ERM in thinking that this would..that 
coming out would be an easy alternative and they've very rapidly learnt that it 
isn't.  I believe that we have to, of course in terms of (break in tape) look 
at international interest rates at the moment too and that's relevant to 
perceptions of the exchange rate and it's significant that our interest rate at 
nine per cent is about the same as Germany, in France it's roughly about 
thirteen per cent, in Spain it's fourteen per cent, in Italy it's sixteen per 
cent.  So, in fact, we are really, if you exclude America and Japan and the 
drop in interest rates there hasn't really helped the American economy, we are 
in the lower league and that point has to be taken into account as well.  
 
DIMBLEBY:                              Yes.  
 
MACGREGOR:                             Therefore I think that the Chancellor 
has to make his judgement as the economy and international events move on, he 
has to make his judgement as to what he does with interest rates. 
 
DIMBLEBY:                              As he starts working out which levers to 
pull accordingly and how to pull them let's just get absolutely clear where we 
are, you are amongst the first to acknowledge that devaluation in itself has 
inflationary pressures, that interest rates cuts of themselves have 
inflationary pressures and they have to be countered.  Now, let me come to the 
general drive of what I'm saying to you again and it's this: that what you 
intend to counter these inflationary pressures with public spending, but not
cuts we now recognise but public spending increases. 
 
MACGREGOR:                             But, Jonathan, that is of course one of 
the many ingredients in the policy and by no means the only one.  But if I can 
turn now to public spending, it's been known for some time of course that our 
target this year was two hundred and forty-four point five billion and 
therefore markets have known that perfectly well and of course  - why - because 
there are so many things in the economy that we seek to do and so many people 
who are actually at the Tory Party Conference pressing us to do those sort of 
things. 
 
DIMBLEBY:                              No I won't stop you in the argument - 
just on that point.  The markets - just a minute, cos it's a complicated 
matter. 
 
MACGREGOR:                             I haven't quite finished. 
 
DIMBLEBY:                              I'm going to absolutely encourage you to 
go on, because I am very interested in it.  But, this, the markets you say knew 
that public spending figure, that target figure, but they did not know that the 
pound was going to be devalued.  We're talking in a different world now. 
 
MACGREGOR:                             Well, I think that all of these mixes 
have to be judged at any one point in time, but can I just carry on with my 
public expenditure argument because there are many very important things that 
are happening at the moment in terms of our current spending programme. 
 
                                       I entirely agree with Judith Chaplin 
when she said that it's rather odd to have an increase in public spending 
described as cuts, but the important things are. Like the road programme - in 
my own field the road programme is at record levels and we see examples of that 
all over the country and that's all directed to improving economic 
performance.  Similarly with rail, similarly in many other areas. 
 
                                      Now I think that the issue for the 
moment, as far as everyone, including markets, is concerned, is this - there 
were fears in July that we would be exceeding that public spending target, and 
certainly - and I speak as a former Chief Secretary - I know that the formal 
way of doing public expenditure negotiations was that there was always an 
upward ratchet in the system, because everyone always came in with bids.   
 
                                       Now that system has been changed, and 
that's another big mark-up to Norman Lamont's credit.  He's changed the system. 
I wholly approve of the change he has made, and that means that we are now 
having to undertake difficult negotiations to ensure that we get the right 
priorities and keep our public spending within the limits we've already set. 
 
DIMBLEBY:                              But we're in this bizarre situation now. 
He have the Cabinet talking all over the place, leaking all over the place from 
Departments about the severity of the cuts - there's blood over every 
departmental carpet, blood in the Treasury, blood at Number Ten - what do we 
actually....and you've just yourself described it - in real terms there is an 
increase (and just to remind ourselves of the figure), a real term increase if 
you hit the target, get down to the target, a real term increase of eight and a 
half thousand million pounds.  
 
                                       Maybe very desirable in the way that you 
said. It may indeed be necessary given the level of the recession, the horrors 
of unemployment, bankruptcies and so on.  But by no stretch of any political or 
economic imagination is that a cut. 
MACGREGOR:                             No, but that was known in the public 
expenditure programme last autumn. 
 
DIMBLEBY:                              Where's the pressure downwards? 
 
MACGREGOR:                             Can I just say this, Jonathan, because 
you said that we're full of stories at the moment about Cabinet Ministers going 
out and talking about cuts and blood on the carpet and all that sort of thing.  
I'm a pretty old hand at these public expenditure games and I actually don't 
remember a year in which there've been fewer of those stories than there are 
this year. 
 
                                       There are a number of journalists going 
out trying to create stories, but they're not getting any of it from us, and 
there is a determination... 
 
DIMBLEBY:                              I heard, I heard you on that film there, 
and it was from  the Conference.  You, Redwood, Lilley - the three of you 
saying - you, in the kind of language that you characteristically use - we have 
to restrain our ambition.   The point is that what is being talked up is cuts, 
whereas what is really happening (and that's for the markets benefit) what is 
really happening is increases and that's for the public benefit. 
 
MACGREGOR:                             But there will have to be cuts in some 
programmes in order to keep within the target level and to meet unavoidable 
increases in others, and we all recognise that and that is why we've been 
talking about restraining our ambitions. But what you do have to recognise is 
that the Cabinet completely is united on this policy of hitting this target. 
 
DIMBLEBY:                              I understand that, but my suggestion to 
you is that with... 
 
MACGREGOR:                             I know what you're saying.  You're 
saying we should below two hundred and forty four point five.... 
 
DIMBLEBY:                              ....yes, what I'm saying to you is for 
you to be consistent by your own lights and credible with the markets.  If you 
don't find somewhere to bear down then you're going to be in trouble and the 
pound's going to be in serious trouble.  What you've got is a devalued pound, 
you've got interest rate cuts and you're proposing public spending increases.  
What are you going to do - put taxes up? 
 
MACGREGOR:                             I come back to the point that the public 
spending increases are already known, but I think the whole drive ... 
 
DIMBLEBY:                              But I put that to you,  just on that one 
point - they are already known but they were known, as you know, in a very 
different economic context, without the devaluation.  With the devaluation we 
inhabit a different world and the question that the markets want answered, and 
you heard part of it coming up in that film...., is where is the pressure 
downwards on inflation in that package. 
 
MACGREGOR:                             Well, the pressure is going to come 
downwards on, for example, public sector pay.  I think we're going to be very 
tough on public sector pay this year and I think that's absolutely right.  One 
of the difficult choices that you always have in Government on public 
expenditure is the options between current and capital spending.   
 
                                       Now I think it's important that we 
maintain as much of our capital spending programmes as we can.  But if you're 
working within an overall limit - again I know as Chief Secretary that you 
sometimes have wholly unavoidable increases in programmes beyond what you've 
set last year - and this is where I think a lot of the difficult choices are 
going to be made and if we make them I believe the markets will see that we're 
being determined. 
 
DIMBLEBY:                             John,  in a moment I want to come to 
these projects that you speak of, but just one more thing on this.  However you 
assess or judge it, you acknowledge that there is a real increase in public 
spending, would be if you ... 
 
(TALKING TOGETHER) 
 
DIMBLEBY:                              Let me put it to you that in the eye of 
the markets, you saying you're bearing down on inflation under those 
circumstances is about as convincing as an alcoholic saying "I'll just have one 
more drink". 
 
MACGREGOR:                             I think you'd better wait and see the 
autumn statement, because that's when it will all come together.  But you must 
allow me to make just one other point and that is that I've been looking very 
carefully at all alternatives that people have been putting forward.  In fact, 
there aren't very many. 
 
                                       The only real alternatives that have 
been put forward are from Gordon Brown who is arguing that we must have (and 
it's becoming a gramophone record) we must have a programme that deals with 
employment, that deals with housing, that deals with investment and so on, and 
all he can mean by that is a substantial increase in spending, although he 
won't quantify. 
 
DIMBLEBY:                              I'll doubtless have a chance to talk to 
him a before long about that.  Let's come back to you.  Let me suggest to you 
.... 
 
MACGREGOR:                             We're avoiding all of that. 
 
DIMBLEBY:                              Let me, let me suggest to you - I 
wonder whether you agree that you are caught between a rock and a hard place, 
because the deeper the cuts that you impose to reassure the markets the more 
pain (and it's now really serious pain that people watching this programme out 
there are enduring) the more pain there is going to be. 
 
MACGREGOR:                             I don't think you can have it all ways 
in your argument.  Can I just put it this way - that throughout Europe, 
throughout the Community, Governments are having to make difficult choices at 
the present time.  We know that industries are under pressure - I've just been 
reading this morning in the Sunday newspapers articles about the German economy 
- so there are difficult choices to be made and this is the time when you have 
to be steadfast and prepared to take them. 
 
                                       Now in terms of public expenditure, I 
hope that we can maintain as many of our capital programmes as possible, but I 
do recognise that within the targets and within the inevitable increases that 
you find in some of the Social Welfare and Unemployment Benefit programmes, we 
will have to make some decisions that involve putting some projects off from 
this year to later years. 
 
DIMBLEBY:                              You want to hold on to your capital... 
 
MACGREGOR:                             That's where I think we're going to have 
to take some of the pain.  I hope as little as possible because I'm very much 
aware of the state of the construction industry at the moment.   
 
DIMBLEBY:                              Well, you're aware of the state of the 
construction industry, you're aware of the needs of infrastructure.  The reason 
why you want to hold on to your capital projects - and you're being 
particularly involved in this as Transport Minister - is not because there's 
some self-indulgent pleasure in spending other people's money,  it's because 
you think it's vital to a sound recovery.  Is that right. 
 
MACGREGOR:                             That's correct.  And a very important 
point here, Jonathan, is that in fact the road programme (if I take that alone) 
is up forty per cent in real terms compared with 1989, so we are actually 
spending a very great deal of money and with very great economic and 
environmental benefits as well. 
 
DIMBLEBY:                              But if you lose, if you lose your 
projects in this spending round - let us say whether it's the Jubilee Line -
which everyone says you're going to lose, and some people say a jolly good 
think too, others say you ought to keep it, if you lsoe so many roads, ditto - 
you believe, and you have to argue that Britain will suffer as a consequence. 
 
MACGREGOR:                             The point I'm trying to make is that 
we've already increased these programmes very considerably.  Now, of course it 
matters - it matters that we continue over, to fulfil our long-term commitment
on the road programme. But the other point we have to take into account and 
hear what you say about recent events in the currency markets and their impact 
on our economy, is right. 
 
                                       The other point we have to take into 
account is that if the public sector borrowing requirement is too high, that 
puts upward pressure on interest rates and that will certainly not help the 
private sector and all the companies that I am keen to see through this period, 
and so that you have to again make a balanced judgement on these matters. 
 
DIMBLEBY:                              And in this balance if something has to 
give - even if I'm suggesting it's not as much as the markets would like - you 
believe that, am I right, that capital projects ought not to give, and however 
painful it might be, spending projects on public, public sector wages, even if 
that's nurses, on invalidity allowances, something has to give there.
 
MACGREGOR:                             Yes, and I think public sector pay 
certainly is one area.  I do think that some of the demands that are being made 
by some of the public sector unions are just wholly unrealistic and it's very 
important to bear in mind what's happening in the private sector to wages as 
well as to jobs at the present time.  So there has to be restraint in public 
sector pay - I have no doubt about that whatever. 
 
DIMBLEBY:                              So if capital spending has to come as a 
priority because of the needs of the economy, what you have to be prepared to 
say,  and what you want the Chancellor to say afterwards to the British people 
is "Yes, we are in the depths of a recession, but I'm sorry we're going to bear 
down, freeze public sector pay, whatever it might be.  We're going to bear down 
on nurses' pay,  we're going to bear down on housing benefit, bear down on 
family credit, bear down on maternity benefit".   Is that what you're after? 
 
MACGREGOR:                             Now you're putting words into my mouth.  
These are all decisions, these are all decisions we're going to have to take in 
the next month, but what I am saying is that we have to meet the targets, we 
have to restrain public sector pay and I think most people recognise the 
importance of that when there are other people losing their jobs and having 
very, very low increases in pay, if at all.  But we have - and there are 
obviously areas, such as the ones you mention: housing benefits, social 
security payments, where we are a compassionate society and we have to meet our 
commitments. 
 
DIMBLEBY:                              But those, Mr. Macgregor, but those are 
porecisely the current spending areas that you referred to when you said, 
persuasively from your own point of view, that capital spending was in the 
order of priorities that you would like to see, and you said unambiguously - 
save capital spending at the expense of current spending. 
 
MACGREGOR:                             Can I just make it absolutely clear.  
What I said was that capital expenditure is very important for the economy, but 
in a situation like this, and we are by no means alone (most other countries 
are in the same position) you have ... 
 
DIMBLEBY:                              That's not much comfort to anyone. 
 
MACGREGOR:                             No, but it's a fact.  You have to 
contain your ambitions, you can't do everything at once.  You may not be able 
to achieve all the projects, to set out on all the projects that you want to do
this year, but the programme remains and, therefore, there will have to be some 
restraint on all sides, but the precise details I think are still to be
negotiated and the outcome will be clear in the autumn statement.      
 
DIMBLEBY:                              Let me summarise.  The more persuasive 
you are in bearing down on inflation, given this real increase in public 
spending, the more you've got to try and limit that real increase, the more 
pain you have got to impose.  The more people that have to be out of work, the 
more redundancies there have to be, the more bankruptcies, the more ... 
 
MACGREGOR:                             You really can't have it all ways, 
Jonathan.  Not at all. The..of course, 
 
DIMBLEBY:                              This is your predicament.. 
 
(TALKING TOGETHER) 
 
MACGREGOR:                             Can I just make another point to you, 
because when you refer to inflation coming down, of course, that's another 
important factor that's got to be taken into account in relation to pay.  It 
also is a factor that this has to be taken into account in a lot of the Social 
Security and other benefits and if you get inflation down, therefore, you don't
have the same huge increases as we sometimes have in high inflation periods 
..(break in tape) social spending. 
 
                                       But when you talk about pay, the fact of 
the matter is that if the public sector borrowing requirement is too high - I 
repeat this is a very important message to all those who are in difficulties in 
the private sector at the moment - if it's too high then that puts an upward 
pressure on interest rates, which is the last thing that they want to see at 
the present time. 
 
DIMBLEBY:                              Secretary of State, you have 
participated in a description of what is a pretty grisly prospect one way or 
the other.  Would you really like to be Chancellor? 
 
MACGREGOR:                             I think that the Chancellor is doing an 
extremely good job in very difficult circumstances, as other Finance Ministers
are finding, and I repeat, I have very important work to do in Transport. 
 
DIMBLEBY:                              But you wouldn't say no if asked? 
 
MACGREGOR:                             That's not a fair question to ask me 
because I'm very happy to be doing what I'm doing in Transport.  
 
DIMBLEBY:                              I'll give a fair answer - which is 
thank you very much Secretary of State.