................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 9.5.93 ................................................................................ SHEENA McDONALD: Good afternoon. Accusations and recriminations now whiz across the battlefield where John Major's bloody-nosed walking wounded still reel in the wake of Thursday's drubbing at the county elections and Newbury by-election. So how can the Prime Minister's troops regroup to justify his claim that they are 'the most formidable political fighting force anywhere in Western Europe'? Mr Major's brightest lieutenant, Michael Portillo, Chief Secretary to the Treasury, joins us with his assessment. We can't just soldier on - said the Chairman of the Tory 1922 Backbench Committee. But what can the Government do to restore the voters' trust? Public floggings - or the firing-squad- for a general or two? Or are they looking for a completely new battleplan? Michael Portillo has been Chief Secretary to the Treasury since the Conservatives fourth consecutive term in office began just over a year ago. Earlier this morning, I spoke to him.. Michael Portillo good morning. MICHAEL PORTILLO MP: Good morning. McDONALD: There's been a lot of reaction already, some of it really quite hysterical is seems to Thursday's results, but let's go back to the fundamentals. What happened, what went wrong? PORTILLO: We've been through a very long and difficult recession, particularly in the south-east of England
with a lot of people very badly affected, and even coming out of that recession there are difficulties for some people, for example interest rates have come down, but many of our voters are pensioners, they don't like lower interest rates. We need to tackle the level of public sector borrowing, that's extremely important, but to do that we're putting VAT on fuel and power, that isn't popular. We've got inflation down, that's extremely important, vital for recovery but the measures that we've had to take during that period have been difficult and unpopular and for all of those reasons we got a protest vote on Thursday of a very large scale indeed. McDONALD: A protest vote of a very large scale indeed. Isn't that a contradiction. I mean your own colleagues are saying this is not a blip, this is something more fundamental. You think it's simply the recession, no, it's the measures you've taken as well. PORTILLO: Well, it depends what you mean. A protest vote to me means that these people are likely to vote for the Conservatives at the General Election, but they take the advantage... McDONALD: What, all those people? PORTILLO: I think a very large number of these people, because what I do not detect at all is that people are saying that they are inspired by the Labour Party or they're inspired by the Liberal-Democrats. I don't even see people saying that they think that the government's policies are wrong, because they believe in low inflation, they notice that we've got interest rates down, the recovery is apparent to most people, not to everybody, but to most people, so I don't even see people saying that we should be pursuing different policies, but clearly they are not impressed by our first year, and clearly they want to see much better results. McDONALD: Don't you voting for the Liberal-
Democrats suggests that they are to a degree inspired by what they say?
Don't you think not voting for you means they don't approve of your policies, I mean that's a very interesting gloss that not voting for you doesn't indicate that they don't like what you're doing if they like your eventual aspiration. PORTILLO: I think people are obviously very angry with the government for the length of the recession and we can go into the extent to which that was our fault or not, but they are very angry about that, but I never heard anybody say that they thought that the Liberal-Democrats or the Labour Party had a solution to the problem which we were missing. McDONALD: I wonder if it's something much deeper than that and actually much more dangerous. I wonder if given the vast extent of the anti-Conservative vote on Thursday and that huge turn-around in Newbury, are they not saying actually "We don't trust you anymore - we don't trust that you're going to deliver what you said you would - we don't trust that you're not going to slip in - (you've mentioned it, the extended VAT charges having previously reassured the voters that that would not happen), and frankly we're not even convinced that what you're doing is the right thing to do in the first place. You've lost the voters' trust. PORTILLO: Well, I think confidence has taken several knocks. It took a knock when we left the Exchange Rate Mechanism, it took a knock after the General Election when people thought there was going to be a recovery straight away, and obviously they don't like the fact that we need to take strong measures in order to deal with the public sector borrowing requirement, but I don't find people developing a whole different philosphy to the conservative philosophy. I do not see people saying the solution to this should be that we should be spending more for example, or anybody seriously saying that it isn't important both to control inflation and public sector borrowing, and that is why I say that it is a protest, it may be an expression of a lack of confidence, a protest against the Conservative Government, but let us just see what evidence there is of restoring confidence. It is clearly there isn't it, there's so many economic indicators, and it is there in the fact that even with very low rates of interest the pound is rising. Now what
that means is that investors in this country are expressing confidence in the efficacy of these financial policies. McDONALD: You say the indicators are there. The voters, and this may be a lagging indicator, may they haven't actually caught up with this recession, with the economic turn-around, maybe they do not believe that the recession has turned around, maybe they want to see a little more than the fabled shoots, or indeed branches that have been mentioned and that we will come on to. PORTILLO: I think they do want to see more. You see, it's bound to be patchy isn't it. Some people are bound to feel it more than others. You can talk to half a dozen businessmen over a couple of days; some will tell you their orders have gone up fifty per cent, some will tell you they've noticed no recovery at all. It is bound to be patchy. McDONALD: What I'm suggesting is that people actually ... PORTILLO: But across the economy you can see a whole range of very encouraging indicators and that really is all that we've been saying. McDONALD: But why should people believe that when for instance, I mean I'll got back to the VAT because in January of last year the Prime Minister reassured voters that there was no intention of extending the scope and reach of VAT and now it's happened. Now why should the voters ever believe anything you say again. I mean I could ask you about a whole range of things you might be considering in the review, and you can say, "Well, at the moment we have no plans". We now understand what "we have no plans" means. What I'm suggesting is that the voters - it's not so much - well it is the policies, but it's also the whole attitude that they don't believe you. PORTILLO: For broad economic management you need to be clear that a government has strong underlying principles, and the underlying principles of this government are sound money which means controlling inflation, because otherwise we're not going to competitive, sound public finances, which means the government not living beyond its means, and controlling the size of the State. Now those are our principles, those are the most important things. McDONALD: What about honesty? PORTILLO: Well, wait a minute. If a recession goes on longer than you think it's going to go on, it would be dishonest to say "Well, we think that we should now set aside our policies for sound money and sound public finances". You must say "Look, this remains the most important thing, we hate putting up taxes you know that because we don't believe fundamentally in putting up taxes but we have now to control the level of public borrowing." McDONALD: Well, why not say "We hate putting up taxes but we might have to do it" Why say "We are the party of low taxation, vote for us, your taxes will go down", and a year later you put people's taxes up. Why not vbe honest with people. If the recession is going to be a very long time coming through why not say that to people? PORTILLO: Circumstances change and we thought that the recovery was imminent at the time of the General Election. McDONALD: Of course you did - but you've been in politics a long time to say that to people. PORTILLO: But not only did we think that - I think every independent commentator thought that recovery was around the corner in April. It has gone on for a year longer than that. Now it is not honest to say to people that you throw out of the window - INTERRUPTION - but the fundamental promise is the one that we're sticking to. The Laboour Party in the last election was campaigning to tax more to spend more. We were campaigning to keep spending under control and reduce taxes over a period of time. The recession having gone on longer than we hoped we have to increase taxes to control our public borrowing, but that is a - INTERRUPTION - no, it is a fundamental difference of policy isn't it. We have no intention of spending more. We think that would be a terrible disastrous thing to do in the present circumstances. It's our honesty -- McDONALD: It's not just me that's suggesting this. I mean last week's Gallup Poll in the Daily Telegraph suggested that fifty-eight per cent of those polled found this government dishonest. Now, one year into this term that must worry you and surely that is one element of Thursday's vote. PORTILLO: If a businessman set out a year ago saying he was going to expand his business and a year later he finds he's laying people off, you don't say "This businessman is dishonest, he broke his promises". You say "Things have turned out differently and this man has had to react to circumstances". Now governments are in no different a position. Things did not turn out the way we thought, we did not set out to be dishonest, indeed we set out to say to people that the most important thing was to control government spending, to control inflation and to have a government that lived within its means, those are fundamentals. McDONALD. The other thing that's coming through there is another criticism of the government which is that it's not just complacent, it's arrogant, that you were saying it as you see it, you're once again you're not listening to the voters. The voters have voted resoundingly against I would suggest, policy, attitude, mood. PORTILLO: Which policy do you think they've voted against. McDONALD: Well, you tell me. PORTILLO: Well, you're conducting the interview and I am asking you this because I don't believe that they are voting against low inflation or low interest rates, or the control of public borrowing or the control of public spending. McDONALD: In your first answer you suggested that they were voting against the imposition of VAT on fuel and heating charges and standing charges. PORTILLO: Yes, and we have to explain to people precisely why that is necessary and we have to stick to that policy. The business of government is governing for a parliament ... McDONALD: So it's something the people don't understand. PORTILLO: Well, let us take some responsiblity to ourselves, we have to explain what we're doing, but the business of government is not at every moment to do precisely what opinion polls tell you. The business of government is to set out your priorities, set out your principles
and over the period of a parliament, deliver the results, and then you go to people and you say, "Look this is what we did, some of it you hated while we were doing it but these are the results we produced and this is why we think that we deserve another term in office" That is how a democracy works. McDONALD: Well, and on Thursday, people obviously didn't think that most of your colleagues at county level did deserve another term in office and voted accordingly, and it's not ... PORTILLO: May I just say there, that is very unfortunate, because many of those people in county - at country level - Conservatives were doing a magnificent job and I can well understand... McDONALD: And feel that you've let them down and they're actually carrying the can for your policies.... PORTILLO: It's very difficult isn't it, when you're a councillor and your party is constantly in government in Westminster, because people take it out on you, and I have every sympathy for that, but it still remains the duty of the government to deliver its policies over the period of a parliament and ask people at the end of that term to be judged on that policy. McDONALD: Look at the way you're doing it. I mean even Cecil Parkinson, former chairman and your former boss, says today in the Sunday Express: The government seem to be claiming the recession was not of their making, but the recovery was. In other words, you take the credit but you never take, call it the blame, call it the responsiblity. Now that is complacency, that is arrogance, as your colleagues and your enemies .... PORTILLO: I would like to explain that point. On the recession it is very difficult for the government either to take credit for its end or for its beginning, when you see that in Germany, in Japan, in Sweden, industrial production has fallen further than in Britain. Now we're neither responsible for the recession in those countries, nor are we responsible for the recession in Britain nor for the recovery in Britain. What we are responsible for is the level of inflation. Let me finish the point. Let me finish the point please. We're responsible for the level of inflation. We let inflation get out of control, that was a bad mistake. We have had to bring inflation back under control. That has required consistent and unpopular policies, but we are responsible for that, both for the failure and for the achievement of low inflation today, and if we had not achieved low inflation today, there would be no question of recovery, and you'll notice that all the other countries that have been successful in the past put great emphasis on low inflation, because without low inflation you cannot compete. McDONALD: "Je ne regret rien" has become an unfortunate phrase for the Chancellor. He uttered it during the Newbury by-election run-up... PORTILLO: Do you know what the question was that led to that answer? McDONALD: I do, but I ask why it was used? PORTILLO: He was asked - "Do you regret that you sang in the bath", to which he (a jokey question I think you'll agree), to which he replied with a jokey answer "Je ne regret rien". And the reaction of the journalists was a round of applause because it was a witty answer to a jokey question. Now you cannot hold that against the Chancellor. But this is, if I may say.... McDONALD: What do you regret, Mr. Portillo? PORTILLO: Let me just say this - I think the press have conducted the most vigorous campaign against the Chancellor. They seem determined to remove the Chancellor and even... McDONALD: Let's leave the Chancellor aside for the moment... PORTILLO: I don't want to leave him aside because I want to say that I think he's done a magnificent job and to be mis-quoted like that is an example of the way in which his position has been twisted around. McDONALD: Well, I'm sure he'll be delighted to hear your support and that you have given the context of the question - nonetheless it was used and it does... people have even understanding of the context in which it was uttered. People see it as somehow characteristic of the Chancellor's attitude, indeed the Government's attitude. Now you've explained that mistakes have been made so presumably you have regrets? PORTILLO: I certainly have a regret about that point that I mentioned to you about the rise in inflation which, by the way, long preceded Mr. Lamont. McDONALD: Anything else? PORTILLO: Well, that has been our fundamental error and that is one that we have put right... McDONALD: The way we left the ERM? PORTILLO: Well, I'll come back to that. You see Norman Lamont when he says I don't regret anything, he KNOWS that if we had not defeated inflation there'd be no recovery today. We couldn't have interest rates at six per cent today if our inflation were still eleven per cent. That would be impossible. McDONALD: What else do you regret? PORTILLO: I think that is our main regret - that inflation got out of control. I think the other thing that we perhaps need to regret is that during this year - that has been so difficult with recession, so taken up with the Maastricht Bill - it has not been so easy to present to people what Conservatives are about. McDONALD: So you regret the way the Maastricht Bill's been handled? PORTILLO: No, no, I don't, but I regret the fact that in a year in which one becomes so absorbed in these twin questions of recession and Maastricht you don't have the ability, the time, the opportunities to present to people that the Conservatives are about wishing to give more opportunities to people. Wishing to give more emphasis to individuals and reduce the role of the State. McDONALD: Right. So the kind of... Let's talk about that, let's talk about that. The kinder, gentler Tory Party. Now the Prime Minister said we will now listen and learn. Who are you listening to now? PORTILLO: We listen to voters - we always have done, and we... McDONALD: So it's not an innovation this idea? PORTILLO: Listening to the people, no. That is what people involved in democracy have to do all the time. But, as I've said to you before, what we have to do is have a programme, we have to have a view about what is good. We cannot just do things that are popular because that way lies absolute disaster. I mean, supposing, for example, we said "We're not going to have VAT on fuel and power because it's unpopular" - then that would mean that we had no intention of controlling the Government's level of borrowing. Now that would be disastrous. McDONALD: Well, the outcome is not.. PORTILLO: And then confidence in the Government would dissolve and it is essential to get on with that task of controlling borrowing. McDONALD: Buy you might look a little further as to why it's unpopular. It is unpopular because people are going to suffer, and poor people are going to suffer. I mean, moving on - we've talked about VAT, so let's look at some of the other things you might listen. I mean, will you be listening now, in the wake of Thursday, to the parents, the teachers, the headmasters, the administrators, Lord Skidelski (phon) himself, who thinks that testing for fourteen year olds, as conceived by the Education Minister, is mis-conceived - should be abandoned this year? PORTILLO: What we say is this. A huge effort has been invested in testing. Some people complain that the tests are wrong. Let us try them out in practice and when we've tried them out in practice let us see what is wrong and let's put them right for next year. Now surely that is a reasonable.. when you've consulted... McDONALD: You were saying that before Thursday, so it doesn't sound as if you're going to be listening to those people any more now - after Thursday - than you were before. PORTILLO: What lies behind the test for fourteen year olds was that we consulted five hundred schools... McDONALD: So you've done the listening there? PORTILLO: Forty-five thousand pupils took part in trying to design them. I think there is no lack of consultation for testing. McDONALD: OK, OK. No more listening. PORTILLO: No, no, no - please. Do not misrepresent me. We have listened to people on this subject. I think the sensible thing.. McDONALD: I simply said no more listening. PORTILLO: And I did not say no more listening - I said we should try these tests in practice. Now what is that saying if it isn't saying that we wish to find out what people think of a thing in practice. But why tear up all that work that's gone into it - why tear up all that consultation. The problem with the testing you know is not lack of consultation - it is, if anything, that so many people have put an input into what we're doing that the thing has become very complicated and very bureaucratic. McDONALD: What about the experts on other sides? PORTILLO: Well, let's find out what the excess bureaucracy is... MCDONALD: What about rail privatisation on all sides, experts, Select Committee, Chairman of British Rail, reckon that the privatisation proposals aren't going to work. Will you listen to them more now? PORTILLO: Well, we've been through that quite often before, you know. I remember British Telecom wasn't going to work, British Gas wasn't going to work, people were worried about different aspects of it, and what we do is we move through the privatisation process, looking at the problems that arise, putting them right and reassuring people. Do you remember on British Telecom they said that there'd be no more rural telephone boxes? There ARE rural telephone boxes today - the only difference is that today they work whereas in the past they didn't use to work. Now that is an example of listening to people, putting things rights and reassuring them. McDONALD: Will you listen to the people who think this Government is NOT well led, and that there should be changes at the top? PORTILLO: Well, I know... McDONALD: And many of them are within your own Party. PORTILLO: I notice that even Cecil Parkinson, who you quoted just now, said that he doesn't believe that there should be a re-shuffle. What. I don't see.. McDONALD: But many of your peers do. There's been Sir Marcus Fox has said there should be, John Carlyle.. Michael Colvin... PORTILLO: As a member of the Cabinet perhaps I'm not terribly well-placed to advise the Prime Minister on whether there should be a re-shuffle. But I think the fundamental point is what policies are we pursuing, and I go back to my original statement to you - that we have had a protest vote, but I see no evidence of an alternative set of policies being presented that the public are enamoured by. They are very, very annoyed with us, for a year in which they've suffered, but I see no question that they want a change of policy. I see no purpose in changing the personnel. McDONALD: So no change.. Mr. Lamont will stay as far as you're concerned? PORTILLO: I think Mr. Lamont has done an outstandingly good job. He's had three Budgets which have really been very effective for us. He took care of the Council Tax in the first one, he put forward an election-winning programme in the second one, and he's determined to tackle public borrowing in the third one. That is not a bad record and every time he goes to the House of Commons he receives a tremendous vote of confidence from the people in the House of Commons. Now, you may be able to ring some individuals up and some of them don't like to be named, but when it comes to votes in the House of Commons Norman Lamont enjoys the confidence of his fellow Members of Parliament. McDONALD: He seems to suffer a great credibility gap in the country though - they're not all his colleagues in the House of Commons. PORTILLO: You know, I think the press (as I said to you) have conducted a really virulent campaign, mis-quoting him and mis-representing him. McDONALD: Why shouldn't they? PORTILLO: Because the press rather like to be able to remove senior Ministers. They think that is somehow now their prerogative, and they have been very disappointed that Mr. Lamont has stayed in his job and he's stayed in his job in order to do a good job. McDONALD: It's not simply the press who are dis.. PORTILLO: And he's stayed in his job because he has stuck rigorously to bringing down inflation, and this is the point - for the future we need confidence that we have a Chancellor who will control inflation and control public borrowing and public spending, and Norman Lamont feels those things right through to his very soul. McDONALD: Right, so a man who for months resisted the policy which he now claims is the only policy is the right man to be the custodian of the nation's economy? PORTILLO: That is a complete misrepresentation. He has consistently said that he wishes to bring down inflation. We brought it down very fast during the time that we were in ERM. I don't think we could have brought it down faster outside ERM. At the end of ERM our interest rates were too high - we've left ERM and we've got interest rates down further. We could not have done that if we didn't have low inflation. McDONALD: It was the Prime Minister who recommended listening and learning on Friday. Having listened to you for twenty minutes it seems to me that you're saying - same ship, same crew, same policies, steady as she goes: no change. PORTILLO:a Well, I can't recommend changing policy, can I, because I believe these policies to be the right ones. I can't recommend changing personnel because I think that Norman Lamont believes in the things that are necessary for the future management of this economy absolutely, and is competent to do the job. I have said to you that I think that in all the day-to-day things we've been involved in - the recession and Maastricht - we have not been able to present to people what we as Conservatives believe in: a small State and more power to individuals. McDONALD: Michael Portillo, we must stop there. Thank you very much indeed. PORTILLO: Thank you. ...oooOOOooo...