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ON THE RECORD
BRIAN MAWHINNEY INTERVIEW
RECORDED FROM TRANSMISSION BBC-1 DATE: 3.12.95
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JOHN HUMPHRYS: Dr Mawhinney, the Budget hasn't done
enough to reverse your party's fortunes has it?
BRIAN MAWHINNEY MP: At the moment what has happened is that
Ken Clarke has made a statement. He has set out what is going to happen in the
terms of the next financial year, as far as tax is concerned, as far as
economic growth is concerned. All of those proposals are going to work their
way through into people's lives and experiences and pay packets. But at the
moment, we're what, three days after a statement.
HUMPHRYS: But the signs are that people are going
to be disappointed when all that's been worked out isn't it?
MAWHINNEY: Well this is what I have dubbed a nine
pound a week Budget. The average family, on average earnings, next year, is
going to be nine pounds a week more in terms of their spending. I don't think
people are going to be disappointed by that. And incidentally, the first
concrete reaction to the Budget happened the very next day when a lot of
Building Societies reduced their mortgage rates, that's good news too isn't it.
HUMPHRYS: Well let's come back to those two points
in a moment if I may. But expectations were raised that much more was going to
happen than actually did happen and those expectations have been disappointed.
MAWHINNEY: Some of those expectations were frankly
silly John. I heard somebody on the BBC talking about the possibility of a
four pence cut in direct tax. What they didn't talk about, what would have
been...how that might have been funded or what would have been the consequences
on the markets or the interest rates if that had been done. So certainly there
was a certain amount of increased anticipation/expectation, some of it frankly
wild. What we got was a Budget in terms of the expectations which had
accumulated about ...the equivalent of two pence in direct tax or one pence
taken directly and about one pence worth of changes to the twenty p band and
thresholds, all of which were focussed to be of major help to those on lower
incomes.
HUMPHRYS: But part of the job of party management,
of your job if you like, is to manage expectations. And if those expectations
get out of hand, partly because of what your own people, on the Right-wing of
the party maybe have been doing and saying, that's down to you isn't it?
MAWHINNEY: Well clearly there is a management
issue. I don't shirk that responsibility nor do my colleagues in government.
On the other hand, both of us are aware that the idea that politicians, even
senior politicians, can manage the media and some of the expectations that it
chooses to carry forward is not the real world John.
HUMPHRYS: No but media is fed by politicians isn't
it?
MAWHINNEY: Well, I don't know that it is frankly.
To a certain extent of course the media reflects what politicians tell them but
the media also speculates on its own behalf and might even occasionally, John,
go out to find people who'll say what the media would then be quite happy to
re-print.
HUMPHRYS: Well let's look at the political
reaction, or the reaction to the Budget thus far. And I know we're only a few
days in but nonetheless you'll have seen the poll that was published this
morning in the Sunday Times, pretty devastating response wasn't it?
MAWHINNEY: But I come back to the point that I made
at the beginning. What we've had is a Budget statement. We haven't even
finished the Budget debate yet. So it would be difficult wouldn't it to expect
people who thus far after three days haven't had any change in their personal
circumstances as a result of the Budget statement, would be premature to expect
them to be reacting in the sort of way that you are implying. I have no doubt
that as the consequences of the continued real economic growth, the Budget
changes, as those make their way through into pay packets next year. Remember
the average family, on average earnings will be nine pounds a week better off,
that people will then see the effect of the Budget, not in terms of what they
read in the newspapers or hear on television but in their own personal
experience.
HUMPHRYS: I take that point and say I want to come
back to the nine pounds but I'm talking about sophisticated people as well,
your own MPs, people like Rhodes Boyson and David Evans who know how many beans
make five because they understand how it works. They're disappointed and
they're prepared to go on the record to say so because of the effect it is
going to have with the grassroots of your party or rather the effect it is not
going to have with them.
MAWHINNEY: But John do you want a list, the tens
after tens after tens of MPs who said exactly the opposite. I mean what is
interesting in these discussions, you and I have had this exchange before is
that if you pick one or two people who have expressed some element of
disappointment...
HUMPHRYS: Sure because the party is meant to be
united.
MAWHINNEY: That's a matter for them. But you will
also know that the overwhelming majority of the party welcomed the Budget,
they welcomed it as a sensible Budget, as a commonsense Budget, as a
responsible Budget and as a Budget whose consequences were going to benefit a
wide range of people in the community and particularly those on lower incomes.
HUMPHRYS: Alright well let's look if I may then at
some of those benefits that you suggest and the reasons why when people realise
what has happened they will be pleased and why I'm suggesting to you the exact
opposite that they will be disappointed. Let's look at education first. Now
expectations have been raised here, you have told local authorities that they
should spend another four point five per cent, that they ought to expect to
spend another four point five per cent because that's what's needed. However,
however, all you have given them is another three point one per cent. How are
they going to do it, they can do it only one of two ways - they can either cut
other things or they can push up Council Taxe, now that's going to disappoint
people when they realise what's going on there.
MAWHINNEY: Let me start with education. You and
others over the last twelve months have been saying: "the people out there want
more money spent on education and you the government don't listen". Now, what
we've done is we've set aside about eight hundred and eighty million pounds
extra to be spent on education. That's a very considerable sum of money. I
have just written to constituents in Cambridgeshire saying that's about four
point nine per cent increase in the education Budget for next year. So what we
did was we listened precisely to what the people and broadcasters like you were
telling us needed to be done and we've set aside that money to be focussed on
education and I hope that the local education authorities will also respond to
what parents and teachers and governors have been saying and see that that
extra money is channelled through to schools.
HUMPHRYS: Yes but it isn't actually four
point nine, what it is is three point one per cent of the total education
spend. There isn't enough money. The figure that you've just given me is only
three point one per cent of the total amount that's going to be spent on
schools - teachers, buildings, teachers' pay rises and all the rest of it. So
they are going to be disappointed when they actually do the sums and discover
they haven't got enough.
MAWHINNEY: Well, I maintain that you already appear
to have done sums which I don't recognise..
HUMPHRYS: Not me, other people..
MAWHINNEY: ...I come to a judgment on behalf of the
nation before either local authorities, or local education authorities have had
the opportunity to even start to look at the amounts of money that they've got
and the consequences of those; much less the schools, much less the parents and
the teachers and the governors.
Now, frankly, if that's the position you
want to adopt, John, that's a matter for you. I have no comment on that but I
have to say that the rest of the people in the country will say eight hundred
and eighty million pounds more for Education, for schools in particular.
That's a direct response by a Government that recognised that parents and
teachers and governors had set a priority on a good funding arrangement for
schools next year and I think they're going to welcome that, providing of
course, that the local education authorities pass on that money to schools and
I very much hope that they will.
HUMPHRYS: Ah, well, provided they pass on that
money to schools and there's the rub, isn't it?
MAWHINNEY: Well, you say there's the rub. That's
the system which we have, John, we have it for many years now in place. We've
had other conversations in which you accuse this government of centralising but
this government does, as its predecessors have done, is to make money available
to local authorities. They, ultimately, have to make judgments about how that
money is distributed but as they have been at the forefront of saying that they
wanted more money available for schools. Presumably, now that they've got
eight hundred and eighty million pounds more for schools they'll channel that
money through to schools.
HUMPHRYS: Ah, but it's not just about passing it
on, is it? It's about topping it up. I mean, we're talking about another
eighty-seven thousand pupils next year, for instance.
MAWHINNEY: And, all of that is covered in the extra
money that has been made available by John Gummer and Gillian Shephard.
HUMPHRYS: So, as far as you're concerned, there's
absolutely no problem for the local authorities here?
MAWHINNEY: Local authorities have to make their own
judgments. That's part of our constitutional system. I believe I'm right in
saying that the local authorities, generally, which includes the local
education authorities made it clear to the Secretary of State that they could
envisage at least one per cent of efficiency savings next year. And, when
Central Government is going through a focus on trying to deliver services as
efficiently as possible and trying to reduce waste to an absolute minimum,
then, it seems to me perfectly sensible that local authorities should follow
the same sort of general direction.
So, the idea that there isn't an
opportunity for local authoritites to focus on efficiency, to look at the
delivery of their services and wonder whether in some cases, they might be
delivered better and more effectively and more efficiently and more in terms of
value for money by the private sector, rather than the local authorities
themselves. All of these are ongoing issues on which the local authorities
have to focus. But, they've had a settlement which you said three point one
per cent - my memory is three point three but we won't quibble over a small
percentage difference. But, there is money there to be spent on local services
and I hope it'll be spent efficiently.
HUMPHRYS: Let's move on to another area where
people have been disappointed and that is Housing. They thought the Chancellor
would do something to give the Housing market that boost that it manifestly
needs - he didn't.
MAWHINNEY: Well, you say he didn't but twenty-four
hours after he sat down most of the big building societies in this country cut
their mortgage rate.
HUMPHRYS: And, the reason they did that is because
they've got vast amounts of receipts coming in and money that isn't going out.
MAWHINNEY: Well, that's what you say. I'm not
entirely sure that that's what the commentators said. As I recall, what the
commentators were saying in explaining this decision was that they had taken a
view and I stress that they take the view - it's not me that's speaking - that
the prospect for interest rates, in their judgment was such that they would
want now to offer a second mortgage reduction in the space of just a few
months.
HUMPHRYS: So, the revival of the Housing market,
then, rests entirely on the shoulders of the building societies interest rates
cuts, in other words?
MAWHINNEY: What the Housing market depends upon is
the state of the economy and people's confidence in that economy. What we've
got is an economy that's growing faster than any other European economy, has
been praised by the OECD, is going to be growing by two and three-quarter per
cent this year, in real terms; about three per cent next year.
HUMPHRYS: Perhaps.
MAWHINNEY: Well, that's the Chancellor's judgement
and unless you've got a better judgement, I'll stick with that.
HUMPHRYS: You've been wrong, in the past. But,
anyway.
MAWHINNEY: And, that economic growth, that real
growth helps to generate the sort of confidence which I believe is going to see
the Housing market move.
HUMPHRYS: Well, then, why haven't we seen it move
already?
MAWHINNEY: Of course, John.
HUMPHRYS: You've been telling me now for some
years how the economy has been doing terribly well and prosperity is around the
corner - if, indeed, not already here. And, yet, the Housing market is stuck
solid. Now, you tell me that this time it is going to move. Well, why hasn't
it already, if that's the case?
MAWHINNEY: Well, first of all, of course the
Housing market under this government has moved enormously.
HUMPHRYS: Downwards.
MAWHINNEY: On the contrary, on the contrary. Let's
let's stick to some sort of vague hold of reality here, John.
HUMPHRYS: Well I think people listening to the
programme will have a hold on that. They all know what's happened to their
houses.
MAWHINNEY: Many, many more people today own their
homes than when we were first into government in 1979, including well over - as
I recall - well over a million Council tenants, who now own their own homes.
And, the value of those homes has risen, in real terms, very significantly,
indeed. We have been through a difficult patch, in terms of the recession and
the coming out of recession. People have held back in the Housing market. Most
of the commentators will tell you. So, you don't have to rely on politicians
that that's a question of confidence. I think, that they're and I speak
entirely personally, I think that there are just the beginning of signs that
that confidence MAY be about to increase a little. I certainly hope so. I say
that on the basis of anectdotal comments that are made to me and I say it's an
entirely personal comment.
But the reduction of mortgages twice in
a few months is likely to aid that process. And, of course, the Housing market
is dependant about the state of the economy but it is also dependant on the
level that people believe that they will have to pay their mortgage at not only
the immediate but in the medium term.
HUMPHRYS: And, of course, it depends on how well
off they feel in general. So, let's look at that. You twice during this
discussion talked about this was the nine pounds a week Budget. People are
going to be nine pounds a week better off. But, let's look at that a little
bit more closely. Nine pounds a week, maybe, but not a nine pounds tax
reduction of course. They're actually going to be something less than three
pounds a week better off as a result of the Budget. So, that that nine pounds
a week figure is terribly misleading, isn't it?
MAWHINNEY: On the contrary, it's the Chancellor's
figure, and he reaffirmed it in as letter to Tony Blair just at the end of last
week because Tony Blair tried to make the same point that you're making.
People who are watching us, John, don't look at their pay packets and say: It's
gone up by this amount for this reason and that amount for that reason. They
look at their pay packets and next year the average family, on average
earnings, as a consequence of tax cuts and real economic growth in the economy,
reflected in Wages, in Child Benefit and the effects of adjustments for
inflation, the average family on average earnings is going to be nine pounds a
week better off. The actual figure in the Budget was four hundred-and-fifty
pounds next year, which is about nine pounds a week.
HUMPHRYS: That assumes a four per cent pay rise?
MAWHINNEY: It assumes a growth in the real economy,
which is reflected in wages. It's reflected in levels of inflation,which as
you know are lower now than they've been for about fifty years. It reflects
increases in Child Benefit; it reflects the tax changes.
HUMPHRYS: Right.
MAWHINNEY: And, can I say that the reason that Tony
Blair doesn't like it - which is perfectly understandable - is that he doesn't
want people to understand that the way we have managed the economy means that
the average family next year on average earnings is going to have nine pounds a
week more to spend, and that's good news for them.
HUMPHRYS: Right, assuming they get that four per
cent pay rise. If they don't the nine pounds a week doesn't apply clearly.
MAWHINNEY: Well, I'm quoting to you the
Chancellor's figures - the Chancellor's-.
HUMPHRYS: I've seen them, I've read the- the
tables, so I know what they mean. What I'm saying to you is if they don't get
a four per cent pay rise they will not be nine pounds a week better off, will
they? I mean, that's common sense isn't it?
MAWHINNEY: What I'm saying to you is exactly what
the Chancellor said-
HUMPHRYS: Yah.
MAWHINNEY: -in the Budget and I'm glad that there
is no difference between us, that if you put together tax reductions, real
growth in the economy, Child Benefit, the adjustments for inflation, the
average family on average earnings next year will have nine pounds a week more
to spend, that's got to be good news. And, they sound as if they're going to
be able to spend that against a background of lower mortgages as reflected by
the immediate reaction of people in the real world to Ken's Budget.
HUMPHRYS: Right. So, the message from Ken then,
and indeed from Brian Mawhinney this morning is: Don't settle for less than
four per cent in the next pay round, because you're not going to be nine pounds
a week better off if you do.
MAWHINNEY: Good try, John, but you know that that's
not what I'm saying.
HUMPHRYS: Well, it's the logic of it.
MAWHINNEY: And, you know that's not what Ken is
saying. But, if that's what John Humphrys is saying people will certainly-
HUMPHRYS: Yeah. John Humphrys never says
anything. He merely poses questions, as you well know, and you're telling me,
and you've said it about half a dozen times in this interview now, that people
as a result of what's been going on, are going to be nine pounds a week better
off, and what I've said to you is that is assuming they get a four per cent pay
rise. So, it follows as night follows day that if they don't get the four per
cent pay rise, they are not going to be nine pounds a week better off.
Therefore, go for four per cent.
MAWHINNEY: No, that's your-that's your
interpretation.
HUMPHRYS: No, no. It's not an interpretation.
It's a statement of fact.
MAWHINNEY: Well, let me tell you what I'm saying.
What I'm saying is that if you put together the tax reductions in the Budget,
if you put together the projected real economic growth next year, and the Child
Benefit changes, and the adjustment for inflation, then the average family on
average earnings is going to have nine pounds a week more to spend next year.
And, if you'll allow me to say so, John, I think that's the message that will
be of some significance to the people who are watching this programme. As I
said, they're not going to be overly concerned about which bits of that come
from which particular aspects of the overall equation. They will look at their
pay packets and they will see a change, and as I said earlier, I think, they're
going to see a change for the better in terms of the amount of money they will
have to spend-
HUMPHRYS: Right. So-
MAWHINNEY: -and they're going to see that against
a background of a lower level of mortgage as announced this week. And, that
will also be of benefit to them, because as mortgages go down John they will
have more money to spend.
HUMPHRYS: Right, so they will disappointed then
if they're not nine pounds a week better off. In other words if they don't get
the four per cent increase that these figures are based on; they will also be
disappointed will they not if they find that at the end of this Government's
term in office they are paying more in total taxes than they were paying when
this Government came in five years previously?
MAWHINNEY: Well, unlike a number of people they
will also understand that since the last General Election this country has been
through a serious recession, as indeed have countries all around the world.
And, we came out of that recession with a very large borrowing requirement. If
we had done nothing about that borrowing requirement both of us know that it
would have had detrimental effect working through in terms of jobs and levels
of prosperity. So, we had three choices. You cut your spending, you raise
your income or you do a bit of both, and we did a bit of both. People
understand that. What they also understand is that neither of the other
Parties has ever, ever said what they would have done to address that huge
borrowing requirement had they been in Office. You will dismiss that as
politicians-
HUMPHRYS: No, I wouldn't dismiss it. I wouldn't
dismiss anything you say, but what I would say is that you did make pledges.
You know: We will cut taxes year on year. And, my question to you which you
didn't with great respect answer there was: People will be disappointed will
they not if they are paying more in tax at the end of your term in Office than
they were at the beginning- and, I'm talking about the total tax take here.
Surely the answer to that must be Yes, mustn't it?
MAWHINNEY: I think, the answer to that question is
that people instinctively - as the Conservative Party instinctively - want to
be allowed to retain as much of their own money as possible so that they can
decide for themselves how to spend it. That has always been our instinct John
as you know. It has never been the instinct of the other two Parties, and it
is a reflection of an instinct in the country that is widely held.
HUMPHRYS: Can you go into the next election?
MAWHINNEY: So, let me - give me a little space to
answer your question. So, as a consequence of that, people will always be
looking for levels of tax that are as low as possible - assuming, of course,
that it is prudent to have them at that level, and assuming also that the
government has enough money being generated through the tax system to provide
the quality public services which people also want, and to which they also
attach significance.
HUMPHRYS: Alright, I gave you space there. We
don't have very much time left now, but in a simple straightforward reply, can
you accept that people could go into the next Budget with their taxes higher
than they were when you took over, and still vote for you bearing in mind the
things you have told us?
MAWHINNEY: Yes, I believe that-that people will
understand that the instincts of the British people haven't changed over the
last few years. It's increasingly clear to everybody that the instincts of
this Party and this Government haven't changed, and it is becoming increasingly
clear that the instincts of the Labour Party haven't changed over the last few
years. It was those set of circumstances which after a lot of hard work and a
lot of explaining and defending and looking to the future, won us the last four
General Elections. It's going to win us the next one also.
HUMPHRYS: Brian Mawhinney, thank you very much,
indeed.
MAWHINNEY: Thank you.
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