................................................................................ ON THE RECORD BRYAN GOULD INTERVIEW RECORDED FROM TRANSMISSION BBC-1 DATE 31.1.93 ................................................................................ JONATHAN DIMBLEBY: The economic predicament facing the Chancellor as described by three of those who will see him next week - the same predicament which forms the backdrop to the demand by the Shadow Chancellor Gordon Brown, that Norman Lamont should produce what he calls"a budget for jobs". A good slogan perhaps but what does it mean and would Labour deliver it? Bryan Gould, the erstwhile challenger for the leadership against John Smith, who resigned from the Shadow Cabinet over Europe, is a backbencher again and thus liberated to say precisely what he thinks what the Shadow Cabinet is up to. You've heard the figures, long term, medium term, high unemployment - what kind of commitment, what kind of belief and assumption does the Shadow Cabinet have to have to turn that slogan a budget for jobs into something that would really mean something? BRYAN GOULD: I think that we have to move off the narrow territory of precise micro economic measures, industrial strategies, training proposals, all of those things which are very valuable in themselves but which by themselves can't do the job. I think we've got to locate those policies in a much wider context we've got to use the language of full employment, of intervention on the Clinton model of public spending, of the acknowledged importance of manufacturing, our commitment to growth and prosperity, in other words what I want to see is some renewed interest in macro economic policy, an area which we've simply ignored for the past ten/twelve/ fifteen years. partly I suspect because we've felt that intellectually we had so little to offer. I believe the circle has now turned, it is now possible to argue for what I believe is the true role of macro policy which is that you adjust it according to economic circumstances, you have a pro-active policy and in today's circumstances that means using the power of government, not just to reduce interest rates or get the exchange rate down, important though they are.
but using the power of government to act directly on the economy to get it moving. DIMBLEBY: Just before we go onto some of that in more detail, you say full employment. You would like to hear John Smith, Gordon Brown and the rest saying we believe in full employment and then go on to define what they mean by full unemployment or is that a get out phrase? GOULD: No, I certainly think that we should restore full employment to the central position as the objective, the fundamental objective of economic policy. Full employment in today's world obviously means something rather different from what it did ten/twenty years ago. It will mean flexible employment and part-time employment, flexitime employment, all sorts of different forms of jobs but it nevertheless should mean making full use of the one resource that we have in abundance which is human talent and skill. DIMBLEBY: And if you don't unequivocally put jobs and full employment as you've described it at the top of the agenda you can't begin to turn that budget for jobs slogan into reality? GOULD: No, I'm afraid that is my view, I think the budget for jobs is an excellent document, contains many useful ideas but the reason that it sank or is in the process of sinking without trace as virtually all of Labour's economic policies have sunk without trace over recent years, the reason is that no one believes that those policies could be implemented. Indeed in the midst of a recession it's even doubtful whether you could find the training places, I think it's very difficult to see that there is the incentive, the willingness, the commitment to invest even if you offered investment allowances, you've got to change the macro context before these precise policies will work. DIMBLEBY: You talked about Clintonest intervention. What I presume in part at least you have to be talking about is a massive, at this point being flexible in your approach to macro economic policies you put it, you're looking at a massive public spending programme directed to generate jobs? GOULD: Yes, well not directly to generate jobs, I mean not actually creating jobs in that rather sort of mechanistic sense but certainly a substantial increase in public spending, principally for investment in infrastructure and the construction industry, which would itself of course create jobs but would also have a very favourable impact on the level of economic activity in the economy as a whole. DIMBLEBY: Now you've got a public sector borrowing requirement now at thirty plus, it's projected by most commentators and we heard some of them being concerned and some equable about it, to go forty/fifty billion. You say PSBR doesn't matter through the roof to get this growth. GOULD: No I would be the last person to say that it doesn't matter but I say that in today's circumstances the actual size of the BSBR is not of prime concern, everybody I think agrees or ought to agree at any rate that the long term solution to the PSBR problem if there is a problem is to achieve growth in the economy. All the evidence is that a growing economy produces remarkably buoyant revenues, that solves the problem. As long as we go on falling deeper into recession the problem of the PSBR will continue to grow. The real difficulty about the PSBR and presumably why the Labour leadership says nothing on the subject, indeed all it says is if the government specifies twenty-eight billion, we say twenty-eight billion if it's to be thirty-seven billion we say thirty-seven billion, if the government then says no, no it looks like forty-five billion we say forty-five billion. The reason we have nothing of our own to say is that we're frightened of the question how do you finance it and it's perfectly true that financing it through additional borrowing or taxation would not only be very unpopular but would be literally counter-productive and would damage the objective that you're seeking to achieve. I would argue that in these precise circumstances which may obtain for only a matter of a month or two we ought to be looking at the creation of government created credit for the purpose of investment. We are quite likely living with the creation of hundreds of billions of credit by the private sector, largely for consumption and imports. Why shouldn't we allow the government to create a little credit in these precise circumstances? DIMBLEBY: In the form of the Bank of England issuing credit notes effectively? GOULD: Underfunding the deficit, monetizing the debt, whatever you like to call it. DIMBLEBY: Okay, now what you're saying to Gordon Brown is - I put it more crudely - but you say tey say twenty-eight, we say twenty-eight, they say thirty-seven so we say thirty-seven, is stop being a little "Sir Echo" and be prepared to liberate the Labour Party from the footprints of the Tory Party. GOULD: That's precisely what I am saying. It seems to me that there is no future, electorally for the Labour Party or economically for Britain unless we have somebody in public life and politics standing up for a rather more sensible economic policy, it's the Labur Party's responsibility to do that and I think that we must now grapple with these issues, we have seen the downside of failing to do so, if you get caught on tax or caught on a narrow ground we always lose out. I think we must now follow the one lesson that I will draw from President Clinton, which is to be brave
about what Government can and should do. It is astonishing that Clinton from a Party which is regarded as much less radical and less ideological than we are,
should nevertheless have cracked it both economically and electorally by identifying public spending and Government intervention as what the electorate is now demanding and quite rightly to. DIMBLEBY: You also have..you pick up Clinton. You
also have in America with the economy beginning to take off, interest rates at three per cent. There is a great debate now going on - we're told that the Prime Minister might be thinking of dropping interest rates by one or two per cent. This is the sort of..the rumours that are floating around the newspapers. Would you have the Shadow Cabinet say - we must have a sharp drop in interest rates, it's no good just going along the one per cent, the one per cent, let's have a shot. Where would you get it down to? What would you have to say? GOULD: Well, and I wouldn't specify... DIMBLEBY: What would you have to say? GOULD: But I would certainly say let's get interest rates down to what is historically a sensible level in real terms. They are still very high in real terms. I think we have not paid sufficient attention to the tremendous debt overhang, the asset deflation which make people feel very badly off, so they need a great stimulus from interest rates if that's what you're relying on. We shouldn't worry about the exchange rate, it has a long way to go yet, if we do, if we are sensible enough to do the work about just how competitive we are, we will realise that the depreciation has done little more than scrape the surface of what's required. We should, I think, in all those circumstances and for all those reasons, go for low interest rates and a lower exchange rate and then, acknowledging that simply pushing on the piece of string will not in itself be enough, that's where the Government inspired spending programme should come. DIMBLEBY: And paradoxically on that you end being with the monetarist Patrick Minford in saying if the pound takes a nose dive, worry not. GOULD: I have never understood what it is that people are so terrified of. If the pound fell low enough to the point where British goods were pricing other people's goods out of the market - which is, after all what has happened to us for such a long time - you would very rapidly see the pound bounce up again, because people wouldn't tolerate that for very long. So the downside risk is very limited. There is a risk on inflation. The whole purpose of a low pound is to subsidise or to stop subsidising imports at the expense of our own production, so you want import prices to rise in that sense, but the risk to inflation is very low at present, the last thing we should be concerned about is inflation. In six month's time if we get the economy moving, we may then have to worry about inflation and then I would recommend that instead of relying simply on interest rates, we should look at a sensible range of credit controls to make sure we keep a control of credit and
the money supply. DIMBLEBY: Well I don't what to.. the credit control debate can take us for another fifteen minutes and it is very complicated, but let... GOULD: Of course, but it does make the point Jonathan, if I can say very briefly. My contention is that MACRO economic policy has to be adjusted, almost month by month. It is not something where you simply set the monetary targets and sit back and say, now the economy will look after itself. DIMBLEBY: On this question of being radical on interest rates and letting the pound take the conseuqences because it is not a serious medium term problem, you are again saying (just to get it absolutely unequivocally clear) to John Smith and to Gordon Brown, stop being so cautious on this, be bold, otherwise you will not be able to deliver what you call your budget for jobs alternative and you will be misleading the public to suppose that you could. GOULD: Yes, as I say, I think the reason that we cut so little ice in economic policy is that people understand very well that if we are committed to the same MACRO economic policy in terms of interest rates and exchange rates, then it's a hard fact of life to admit to, but there
will almost always be an interest rate premium demanded of a Labour Government by the markets. So people understand that simply saying we are with the Government in very respect, accept if we want lower interest rates, that really is not convincing. DIMBLEBY: Now, doubtless John Smith and Gordon Brown, if they are watching us, will be wishing they were in the studio being able to say - what nonsense you're talking, in their judgement, but what they would say to you surely is, if you really think Bryan Gould that we are going to jeopardise a hard earned reputation for prudence that got us nearly there, it didn't quite get us there, but it got us nearly there, if you think we are going to do that, you must be stark raving bonkers. GOULD: There is nothing imprudent in what I am suggesting, indeed, I would argue that it is merely what commonsense and the exigencies of the situation require. It is what is taken for granted; it is a matter of course in other successful economies. There is nothing risky, radical, revolutionary, about what I am proposing. It happens, of course, to be very consistent with the radical impulse which brought most Labour Party activists into politics. DIMBLEBY: So what's wrong with them, what's wrong with them? Is it not that they do deal in political reality and you are liberated to deal in political fantasy. GOULD: I think the whole of British economic policy-making is infected by an excess of caution and excessive attachment to the interests of asset-holders, an excessive concern for short-term interests. The Labour Party, unfortunately, has proved itself to be no exception to that. It is time that the Labour Party showed the way and led the way in breaking free of that last hangover from an Imperial economy. DIMBLEBY: And if the price is to be charged across the press by the Government, by commentators, with being the big spending Party, the spendthrift Party, the Party of high inflation, the Party of the sinking pound - do you seriously believe they will be saying, do you seriously believe we can go into an Election with those albatrosses around our neck?. GOULD: Well, of course, all sorts of rubbish will be thrown at us. We could not expect to put forward a sensible, let alone a radical, policy without that sort of charge being made against us. But surely, after ten to twelve, thirteen years of desperate failure, culminating in our currently desperate situation, and it's hard to overstate how badly we've done, surely, this is the moment when we should have the courage to say "It need not be like this", and a Labour Government would do so much better. DIMBLEBY: Cat amongst the pigeons, Bryan Gould. Thanks very much. Very interesting.