Transcript of Press Conference given by the Prime Minister in London.
Read the transcript:
Prime Minister:
Thank you all for coming today and let me wish you all a Happy Christmas.
I want to just give a few remarks before I throw open the questions. The main lesson I have learned from previous recessions is that not only must governments act early to prevent lasting damage to economies, but that an economic slowdown must not be an excuse to slow down the pace of investment and reform to strengthen our country for the future. So that is why alongside the action we have taken to prevent the collapse of the banking system and to give real help to families and business, and mortgage deferral for those who lose their jobs and encourage the banks to maintain lending, we have also taken action involving some tough decisions and difficult choices to accelerate the pace of welfare reform, more support for the unemployed and those on benefit on condition that they get the skills they need to stay in touch with the workplace.
We have put the Royal Mail onto a long-term sustainable footing with more investment and are proposing a minority strategic partner. We have taken tough decisions in the Pre-Budget report to increase government efficiency and control public spending and raise tax fairly to ensure our public finances remain sustainable for future generations, the fundamental reform of our national planning regime, our energy and transport systems, and our climate change goals that are the most ambitious we have ever had.
And we are matching these tough decisions on reform with increased investment. £10 billion extra public investment next year compared to last year because even in the midst of a global financial recession it is vital we do not lose sight of the future challenges and opportunities facing the country. So if 2008 was the year we confronted the global downturn, 2009 must be the year that the world comes together to invest and build a prosperous future while giving real help to families and businesses now. The countries that continue to invest for the future through the downturn will be the countries that emerge stronger in the future. There is no credible plan for getting out of this downturn that is not also a plan for building a better long-term British economy. So we must invest out of the downturn to equip us for the upturn. We must build tomorrow today.
So in Britain in the New Year we will set out our plans for smart investment in the industries of the future that will give us global leadership and create products and services we can sell to the world. A new programme of investment in green jobs and the environment, starting with our plans today to be a world leader in cutting-edge environmental technology such as carbon capture and storage. There will be investment in the digital economy, a market currently worth billions and expected to grow rapidly in the years ahead. This is another sector where Britain has potential to be a world leader, and in January we will publish our comprehensive plans for Britain’s digital future.
We are making investment in transport to ensure our infrastructure is fit for the needs of the 21st century including a decision on the third runway at Heathrow. There is going to be continued investment in alternatives to oil, and in nuclear to secure our long-term energy supplies. In January we will also set out new plans for the skills and jobs of the future enabling people to retrain during the downturn so that they are prepared for the upturn. We will come forward with plans to ensure that talent is not wasted and people make the most of the opportunities regardless of parental background with a White Paper on social mobility. There will be further measures to ensure that the banking system gives support to businesses large and small to keep the economy moving forward. And because we must also change the way that government works, our decision on Royal Mail will be followed by other action to get the best return from government-owned assets. At every stage, therefore, real help now and real hope for the future. Two sides of the same coin.
These are uncertain and difficult times but Britain can and must be a beacon of hope and opportunity for the future. The scale of the challenges we face is matched by the strength of my optimism that Britain can rise to meet these challenges. With our fighting spirit and our can-do attitude I am confident we can meet all the challenges ahead. Security challenges, environmental challenges, the challenge of making ourselves a better educated nation and the enormous financial and economic challenges we have before us. We are a free trade country, we have the most open economy in the world, we have a global reach greater than any country of our size, we have some of greatest inventors and entrepreneurs in the world. With the right policies and a long-term commitment to investment we can not only help families and businesses during the downturn but we can as a country emerge for the global future that is ahead of us.
I am very happy to answer questions. Throw any questions at me. Please don’t throw your shoes at me!
Question:
No, no shoes and thank you for the mince pie Prime Minister. Happy Christmas.
A year ago on this very day I asked you what your message was to people about how tight economically it was going to be for families up and down the country. Can I ask you precisely the same question, but just before you answer, can I ask you to reflect on what you said then. What you said then was what the British people need to know is that there is not going to be a repeat of the events of stop-go and boom and bust that we had in the past. Do you regret that answer?
Prime Minister:
What I regret is that we have been unable to remain unaffected by a global downturn and that the events that started in America before last Christmas have spread right across the world in a way that nobody wanted and to a large extent nobody had foreseen. Look our job is to provide real help to families and businesses now. That is the task ahead. It is the task for every government. What we have achieved in the last few months is when we put money in and recapitalised our banks, we were the first to do so. We did not know that other countries would follow. It is good that they did. When we then decided that there had to be a fiscal stimulus and real help for families and businesses in the economy, we did not know then that other countries would follow, but other countries have done so.
We have got bigger decisions to take in the New Year, and I hope we can take them in a co-ordinated way. So yes it is unfortunate that we have been the victim of a global downturn, it is unfortunate that it has spread from being a financial crisis into affecting all the sectors of our economy, but we are in a strong position to deal with this, because we have cut interest rates, we have injected money into the economy, and we are a competitive economy. Over the next few months you will see for many people, as a result of the fall in oil prices and the fall also in food prices, that standards of living for many, many people will go up. So we are placed better than perhaps we were in the past to face problems, many of which we have had no control over, and that is really what I am going to try and do in the next few months, not only to help people now but to build this country for the future.
Question:
Prime Minister I wonder, looking back over the past 12 months, if there was a moment when, to use a seasonal metaphor, you thought your goose was cooked, and whether in the interests of the stability you have talked about, there is a date before which you would like to rule out holding a General Election?
And on a completely different topic, can I ask you why things just get worse in Zimbabwe with the government in denial about cholera and yet the international community seems impotent?
Prime Minister:
I am giving no thought to an election. Let me just say this: that the one thing that 2008 has taught us all is that people are less interested in the ups and downs and ins and out of internal political wrangling in London and Westminster. Really they judge their politicians, and their politicians will continue to be judged, as to whether politics is effective and what they actually do, and whether they can deal with the big challenges and make the big judgments that are vital when problems have to be dealt with. So in my view what 2008 has taught us is that the public are less interested in the minutiae and the trivia of everyday events of personalities and conflicts in Westminster. What they really want are governments that can actually get on with the job and do what they intend to do and that is to give real help to businesses and families and at the same time provide hope for the future that you are going to invest in your country in a way that is going to bring prosperity for people in the future.
Zimbabwe continues to be a tragedy. I believe the situation, contrary to what President Mugabe says, from all the evidence that we have, is deteriorating and deteriorating rapidly. We now know that 1,100 people have died, 20,000 people are affected by cholera, we now know that the methods that are being used to treat the disease are antiquated and that they cannot bring the hope and the help to people that are suffering. We are dealing with the failure of a regime with no proper sewage and water systems, no proper healthcare systems. We have got hospitals that are lying empty when they could be serving the people of Zimbabwe. My call over the next few days is to the Southern African Governments to work with us to make sure first of all that we get the humanitarian aid into Zimbabwe to help people and secondly to make sure that it is absolutely clear to the people of Zimbabwe that we support those who have democratically elected politicians of Zimbabwe and not those who remain in power simply because they have held on to power when the electorate has not supported them.
Question:
Prime Minister, this week Sir Richard Branson told us that he thought the British economy was wrecked. He did not actually use that word. He used Gordon Ramsey’s favourite word, but I am trying to be delicate about this. Is one of Britain’s greatest entrepreneurs right to be so gloomy about the future?
Prime Minister:
Absolutely not because Britain, as I have just been saying, has been making some of the big decisions about how we can prosper in the future. Look at what we have done this year. Before other countries saw the need to do so, we realised there was a fundamental failing in the banking system. Now there is still an issue about how banks resume lending to businesses and that is an issue that we are addressing every day with the banks themselves, but if we had not acted banks would have fallen in Britain and banks would have fallen in the rest of the world, and so we took the action that was necessary and fortunately other countries in similar positions followed that action. What do I say about the British economy now. We have low interest rates, we are well placed because inflation is coming down, we have made a fiscal stimulus into the economy which is already in my view making some difference, we are more competitive now than we have been in the past and able to sell abroad and at the same time we are making the long-term and vital decisions that are necessary for our economic future. And I think if anybody looked at Britain now with the plans we have for transport, for planning, for energy, for nuclear, for climate change, for science, for innovation they will see a country that is preparing for the future even through the downturn and that is why our policy is that there is real help for people now. But there is real hope in the decisions that we are making about investment in the future and that will become clear in the announcements that we make in January and February of next year.
Question:
There has been a lot of talk about what is happening with the car industry. Just very specifically on Jaguar-Land Rover, what are your thoughts about the fact that Tata, its owners and parent company, have just massively sponsored Ferrari and Formula One. Should we be in talks with a company that has got money to spare elsewhere?
Prime Minister:
Well to be fair to Tata they have taken over one of the best research and development facilities in our country, the Jaguar research and development facility. It is the best in the car industry and one of the greatest facilities in Europe and they have been investing in the new research and development for the future. Now different industries will have different problems at this time. There is a problem about consumer demand in the car industry. We of course talk to the larger companies in our country regularly but I have got no announcement or decision to make about what we can do. These are issues that will be debated over the next period of time but there is no promise that we have made of support.
Question:
Prime Minister, the pound and the euro will shortly reach the same rate. Will you step in to protect the pound at any stage?
Prime Minister:
The issue in our British economic policy is that we do not target the exchange rate. In other words we do not have a policy that is directed towards a particular level of the exchange rate. That was what happened in the past. It is not what we do now. What we do is target the inflation rate and inflation is being dealt with, it is coming down. Now of course there is volatility in every economy around the world and of course exchange rates are going to go up and down depending on a number of different things that happen. But just let me be clear, the basis of our economy is what we do to target inflation and get it down and how we can have low interest rates, how we can have a fiscal stimulus to get things moving so that we can give real help to businesses and families now and at the same time how we can prepare better for the future with all the decisions that we have made. And therefore the day-to-day movements of a currency and of the pound are not something that I think it is worth giving a running commentary on.
Question:
Prime Minister can I also remind you of something that you said a year ago today, you said that we have prevented the spreading over of the problems of Northern Rock to other institutions in the way that some people predicted, and therefore that is a sign of the financial system and the system itself, a tripartite system working well. Can I ask you when you said that, did you really think that the system, the financial system was working well or were you secretly …
Prime Minister:
I wasn’t talking about the financial system, I was talking about the tripartite system, which is quite different. The tripartite system was …
Question:
Inaudible.
Prime Minister:
No, you said the tripartite system.
Question:
And the system itself, the tripartite system working well.
Prime Minister:
Well I was talking about the tripartite system and the tripartite system is the Bank of England, the Treasury and the Financial Services Authority, and they came together to look at the big decisions that you have got to make in relation to the financial system. We had to make difficult decisions on Northern Rock. To be quite frank we didn’t want to nationalise Northern Rock, we would have preferred not to do it, but the market deteriorated. I think you have got to bear in mind that what actually happened last autumn, only a few months ago, was when Lehman Brothers collapsed in the States and wasn’t given support by the US government, that was their choice. A totally different set of events followed from that where people had no confidence in any financial institution at all and so that sparked a very different wave of actions that had to be taken and considered.
So from where we were last year dealing with the problems of Northern Rock and trying to contain them within Northern Rock, when Lehman Brothers went last September it had a huge effect on the whole of the system, money dried up, we then had to come in, we made this difficult decision to recapitalise, in fact, take shares in some of our biggest banks. Other countries then followed to do so. That prevented the collapse of a lot of the banking system, but of course we still have the problem, and the problem is this, that to get the banks to start lending again in the way that we want is a challenge at a time when there is little confidence in the system.
And so our measures are designed to build confidence in the system and then of course to sort out some of the problems that have been inherent to the banking system. But I think you will find that if you look at that quote I was referring to the tripartite system.
Question:
I just wonder Prime Minster if you could give us your assessment of why banks are not lending to business at the level that you would like to see. Is it that they are still short of capital, as the Deputy Governor of the Bank of England was suggesting? Is it a question of liquidity? And do you think there is a case for the FSA cutting the minimum capital requirements for the banks to encourage them to lend?
Prime Minister:
Well these are big questions and all of them of course we address in detail. We haven’t had, if you like, the up to date data for what is actually happening in the financial system, and that will come very soon, I think it will be published on 2 January. And we will find what support there has been for small businesses, what support there has been for the larger companies. But technical issues of the capital ratios, capital adequacy requirements, we are and continue to look at, as the Governor of the Bank of England has said. But I think that the basic problem is people being absolutely sure that the distressed assets, or what you might call the rotten assets that have been in the system, have been all written off and people being sure therefore that the recapitalisation that is taking place and the injection of money into the banks is there to allow for new lending to take place. So we are doing a lot of work on these questions, we will have more to say at the beginning of the year.
In the meantime let me just make it absolutely clear that for small businesses the loan guarantee scheme, the export credit and guarantee scheme available to them, the deferral of tax, which includes national insurance, VAT, corporation tax, all these measures, and more, including specific help through the European Investment Bank that is channelled through some of the main banks in this country, is available to small businesses. And I want small businesses to know that, not only is this help available, but we are ready to extend that help so that small businesses have the finance that they need. We keep looking at the individual issues relating to the banking system but we are taking action, that only a government can take at this stage, to restore confidence in the whole system.
Question:
Prime Minister in the last week you have just travelled to six countries in so many days, culminating in the announcement that most British forces will withdraw from Iraq by the summer. Can you say is there such a thing as a Brown doctrine on foreign policy, and if there is, would it countenance the invasion of another country without the explicit authorisation of the United Nations?
Prime Minister:
Well can I just say that there are occasions when it has been impossible, no matter what you do, to get agreement at the United Nations and I am particularly sad - and this is not to do with the invasion or military action in relation to a country – that over the summer we could not get agreement within the United Nations when we wanted to take stronger action to help the people of Zimbabwe, and this was vetoed by two countries. So we have got to recognise that there are problems that sometimes you do not anticipate, even when you are dealing with these great humanitarian questions.
I think the lesson of the last year – and this will be the theme of the G20 that will be held in London in April – is that global problems need global answers and global means of acting. And if the world is not prepared for many of the events that have happened to it, it is because we have institutions that were created in the 1940s that are not fit for the task of 2008. And if we are really going to deal with climate change, if we are going to deal with financial instability at a global level, if we are going to deal with economic reconstruction for some of the states that have become failed states, if we are going to deal with the terrorism problem, then the lesson is that you need more effective global institutions and more effective commitment to cooperative global action.
Now I believe the basis of that exists, as we will find at the G20. We have an American administration coming in that is determined to work with other countries to address some of the problems, including climate change that exists around the world. We have European leaders that are happy to work with America to deal with some of the problems that we face in common. I believe that China, India and other countries that have been part of the emerging markets are ready to work with us.
So this is not a doctrine, this is something that we have learnt that I think we should now apply, and is we have a world where almost every major problem cannot be solved by one country, or even one continent, on its own and you need that global action, but we need to find the means by which the world can work more cooperatively together.
In one sense the November meeting of the G20 was the start of action, but we have got to do a considerable amount more if we are going to prove that when you have a global problem we can come together to achieve these global answers.
Question:
Prime Minister could you explain your rationale behind the decision which I understand the government has made to advise British people not to invest in properties in the settlements? The timing of it seems a little odd, especially in the run-up to an Israeli General Election, the risk of alienating the very people you are seeking to influence to vote one way or another in the global issue of trying to get peace in the region? And secondly, could you give us some guidance as to what Israel can do in facing the on-going rocket attacks which have restarted over the border from Gaza?
Prime Minister:
Well I would call for restraint from both sides. Now that we have had announcements about an end to a ceasefire, I would call for restraint from both the Palestinians and from the Israeli government. But it is totally unacceptable that there are rocket attacks coming into Israeli territory and to hitting Israeli citizens in this way.
Look, stand back from what you are talking about on settlements and look at what the real challenge is. The challenge of the next few months – and settlements are part of this – is to convert what has been a goodwill that has existed over many months for the idea of a settlement that includes the map, includes the borders, includes settlements and outposts, includes the status of Jerusalem, includes the return of the status of refugees, all these issues. I think people know roughly where a settlement could actually come out. What we need is the injection of energy and political will in the next few months to make what people know can happen actually happen itself.
So I think you have got to stand back from the settlements issue where there will be changes if there is an agreement between Palestine and Israel, and look at the main issues that can actually be resolved over the next few months. And the more I travel, and I was in Iraq, and I have been in Saudi Arabia, the UAE, and Qatar and Kuwait, the more I travel the more I realise that for a proper peace and stability in that region, including in relation to Iran, it is necessary that we move further and faster towards a Palestinian-Israeli settlement that respects the desire of the Israelis, their rightful right to security within their own land.
Question:
Prime Minister interest rates are low and falling, that means that people, particularly pensioners who rely on savings for income face their income being reduced. Now we know inflation rates are coming down, it is very important for savings, we know that you have done a lot for pensioners, winter fuel payments, things like that, but what people would like to know is are you prepared to look now at the tax system, changes in the tax system, to help savers, whether it is on ISA limits or other aspects of the tax system to help savers?
Prime Minister:
We have already said in the pre-budget report that we are looking at a number of mechanisms by which we can make it more attractive for people to save. But look, I think the idea that underlies your question is somehow that inflation coming down and interest rates coming down is a bad thing for the economy. It is a good thing for the economy. It is only when you have low inflation that savers are best protected. Low inflation is the best protection for savers, that their savings and their wealth is not eroded by simply rapidly rising inflation. So inflation coming down is a good thing. I think people also might note that at the beginning of January for pensioners, we are effectively putting the pension up from 1 January, not 1 April, we are doing that by giving pensioners an additional £60, that is the equivalent of the next few weeks with the rise in pensions effectively from April. So we are doing what we can to raise the pension and to raise the pension credit, so there is more money going into pensioners in the next few days. And that is how, by giving real help to people now, we hope that we can move the economy forward.
But let’s just be clear, low inflation and low interest rates are good for our country and are a necessary means by which we get the investment that is necessary for the future.
Question:
Prime Minister, this Christmas a lot of parents are going to be struggling to give their kids the Christmas that they want. Do you think there is too much pressure these days for kids to have, you know, the latest toys and the latest games or whatever?
Prime Minister:
As the father of a 2 year old and 5 year old who are very excited about Christmas, it is difficult to say that excitement in Christmas is or is ever going to be less. But I think the toys that are around, the books that are around that I have seen are very innovative and very exciting, and I think to some extent some of these prices have come down quite recently. So yes, I hope that people at Christmas can give to other people and to give to charities as well as simply give presents to themselves. But I think you will see that there is a far wider range of Christmas presents and some of them are actually a lot cheaper than they were a few years ago.
Question:
Prime Minister, I was wondering do you believe it will be possible to relieve the unresolved political issues between Russia and the UK aside during the times of the global crisis and focus more on the … relations between the two countries?
Prime Minister:
Well let me be clear, we want the strongest possible relationship with Russia, and I have talked to President Medvedev recently and I keep in touch with him on all these issues. We are intent obviously on reminding the Russians of the problems that have been caused by the assassination in London and our inability to extradite Mr Lugovoy to be brought back to London. And we remain concerned about what happened to the British Council and the entry into its premises and not allowing it to behave like every British Council is allowed to behave in most countries of the world. So there are issues, yes, between our two countries but we want the best possible relationships between Russia and Britain and I hope these issues can be resolved.
Question:
Prime Minister, going back to the car industry, don’t you think it is essential now to actually provide the access to credit and government-backed guarantees for borrowing for automotive companies, not just Jaguar, but Nissan, the component companies, all the way down the supply chain, to see them through this recession. And finally would you urge people to buy British built cars, such as Nissan, to help the industry at this time?
Prime Minister:
Well we have great British cars and great British models and I have visited all the major plants in Britain at one time or another and I am very proud of the professionalism and the expertise, and indeed the quality of the models that are on offer in Britain.
Yes, we want to do everything we can to help the car industry through these difficult times, but I am not today going to make specific announcements about what we can do in any individual area. And it is very important to recognise that the first responsibility for the running of a particular company lies with the company itself. So we are happy to debate these issues with the car industry, but I am not able, and I am not going to announce any particular issues today.
Question:
It certainly hasn’t been dull, but on a personal level what kind of year has 2008 been for you?
Prime Minister:
It has been challenging. Look, if you are in politics the only point of being in politics is to do what is right and to do the best thing. And I think what I realised during 2008 was that the traditional way that people look at politics has been about who gets on, who loses out, who does what. It really doesn’t matter at all, it is yesterday’s news before it is forgotten, and it is forgotten. The key thing that matters is to make the right decisions, do you have the right long term judgments, have you actually looked at the big issues that you face and dealt with them in the right way? So if you like I am focused and will continue to be focused on these big issues.
Next year we have to host an international conference, the G20, where I hope we will make major advances in the way that we can manage the global economy. We have got Copenhagen coming up at the end of next year where Britain and Europe are leading the way on climate change.
So these are the issues and if you like I think less about the day to day gossip and more about the important issues that any politician in the job that I am in has got a responsibility to deal with. And the question is whether you make the right judgments.
Question:
[Indistict]… Barak Obama’s inauguration next year, what is the biggest change you would want to see in American policy? The word is that you would want to achieve next year the urgent issues that you want to work with him, make progress on. And just a question about Japan, do you have any opinion on Japan not taking a lead in the climate change issue and not setting mid term goals?
Prime Minister:
Well first of all let me say that we have always had good relationships with America and I do, and I am grateful to President Bush for the friendship that we have enjoyed, and we have worked together particularly on the issue of combating terrorism. I think President Obama has already indicated that one of his priorities is climate change and you rightly say that this is an issue in Japan as well. And I believe that there is now a possibility, after the European Agreement last week, for America and Europe to agree on a radical and ambitious climate change programme. That in my view will not just be about climate change and the environment, it will be about a change in the way we run our economy, a low carbon economy, and that in itself – as President Obama has said – can create hundreds of thousands of jobs, new jobs for people in this country and in other countries. I think we will want to work closely on the economy and I think that the G20 meeting that President Obama will attend will be a very important meeting for the discussion of economic issues and I believe there is a huge amount of common ground between America and Britain, and indeed between all the major countries that we need to do far more together and cooperatively if we are actually going to solve some of the problems that arise from this financial crisis.
Question:
Prime Minister we understand you have written a letter to the winner of X-Factor’s mum. How many letters does that make now, and will you be buying the single?
Prime Minister:
I think I will be buying the single as one of my Christmas presents. I think it was a great song, I happened to hear some of it on Saturday night. But I have met her mother and she obviously is leading a campaign that I also want to support for there to be donors, and the donor card system has got to be improved because the fact is that only 25% of people have cards, but 90% say that they want to and would give an organ if it was going to save someone’s life. So her mother has been an inspiration in this campaign and I think Alexandra is going to be a very successful singer in the future.
Question:
Is it your estimation that because of the state of the financial sector in London that the recession will actually hurt this country more than a lot of other countries? And in the season of goodwill, could you tell us a little bit about your transformed relationship with Peter Mandelson?
Prime Minister:
Look, the financial sector first of all, the financial sector in Britain is big and it is very modern and has been leading the world. And obviously if you have a financial recession those countries that are big financial sectors are affected. But my view is that our financial sector is capable of reviving, it is capable of doing well in the future and we will shortly publish our views on how we can retain a world class financial services sector in this country. So yes there have been difficulties, and yes the financial sector has been the most affected of all sectors in the world, but yes also I am confident about the future.
And look I am confident about the future of Britain for the reasons that I think I just need to explain once more. We are a country that has taken action to reduce interest rates, so interest rates are low, so we go from a low inflation economy. This is not like the 1980s or the early 1990s where inflation was so high that it was impossible to cut interest rates. We have actually been cutting interest rates and we have got low interest rates now.
The second thing I would just emphasise is we have taken early action to deal with the fiscal position so that we can actually inject money into the economy now, we have a plan for the stability of finances over the longer term that led to announcements in the pre-budget report and so we are able to invest now in the economy.
¼br /> And I would just say to people, there is no country I go to in the rest of the world where people are saying do nothing and just let it take its course. There is no party that I meet in any serious position which is actually saying to me do absolutely nothing and just let things take their course by no fiscal action whatsoever. If you were to cut borrowing now, and if you were to at the same time have public spending cuts very soon, you would make for a longer and greater deterioration of the economic position. The fact is if your monetary policy is cutting interest rates, but there is an impaired mechanism that you have got to gradually be able to sort out, then governments have to use fiscal policy, and that has been seen in every country of the world.
So I think the action we have taken on interest rates, the action we have taken on fiscal policy, the action that we are taking to resuscitate our banks, these are all absolutely crucial for the future, and the real help that we are giving to families and businesses now is not just about the present, it is about building a better and stronger economy for the future.
And Peter Mandelson is doing a very good job as Business Secretary, as I think everybody knows.
Question:
You have outlined all the economic action that you have taken, the fiscal measures and the recapitalisating of banks and new measures in the New Year. Do you feel you have a mandate to carry these through with the British public? And secondly what economic measures is the Brown family taking this Christmas to tighten its belt during the credit crunch?
Prime Minister:
I think we are sending more Christmas cards this Christmas than ever before. But you are asking what actions we are taking and whether we think we have the support of the British people to do so. I believe what the British people are looking to government to do, just as other governments in every other country are expected to do, is to take the action that is necessary to take us firmly and safely through this downturn and build a stronger Britain for the future. And I believe that people are sensible enough to know that this is a global problem, that it is a problem that is affecting every continent in every country, that it started off as a financial crisis within the banking system and has spread to the rest of the economy, and they want us to take action to deal with the banks and to sort out the problems in the banking system. They want us to make sure that the economy is given the best chance to grow, they want us to take action where we can to deal with unemployment and even although conditions are difficult and harsh, we will take action to deal with unemployment, as we are taking action to give people confidence that they will not be repossessed as home owners as long as they are making an effort to pay their mortgages.
So I think that is what the British people want us to do, and that is what we will continue to do.
Question:
In 12 months time, next Christmas, what yardsticks would you like us to use to gauge the impact of the government’s measures for easing the effect of recession? Do you for instance expect unemployment to have peaked by next Christmas?
Prime Minister:
These questions about what is going to happen in the next year, it depends upon whether we can get the coordinated international action that we want. Yes, we can do a great deal in Britain, cutting interest rates, putting money into the economy, sorting out our own banking system, giving real help to businesses, particularly in this difficult period of time. So the action that we take can have a multiplier in its effects if other countries take similar action at the same time. And there is a study that has just been produced by the International Monetary Fund to say that you will get twice the effect of action that you take in your own country if other countries take similar action at the same time. And in a very open economy where people trade with each other, that is hardly surprising that other countries may not get the benefit of your action unless they take action themselves, and we want countries to work with us on a coordinated plan.
So I actually look forward to the next year. What happens over the next year will of course depend on a number of factors. I mean who could have predicted that the oil price would be $150 a few months ago and is now $45 today. But a lot will depend on a number of factors, but I think the most important thing is why the G20 meeting is important is that in a global crisis you actually get people to work together for global solutions. And this is, as I keep saying, the first crisis of this new global age. It has got to be dealt with in different ways from other previous crises. We are fortunate that inflation has come down, and therefore interest rates can come down, and that didn’t happen in the early ‘90s when there was a recession. But we have got to get other countries working together with us and that is the purpose of a lot of the actions and why I have been spending a lot of time talking to other people in other countries as well.
Question:
And unemployment?
Prime Minister:
Unemployment, we never make forecasts about unemployment but we know that we are in a difficult situation with unemployment affecting the retail sector and affecting the construction sector in particular, but we also know that we are doing everything that we can to make help available. Unemployment is a huge priority for this government, to tackle it by taking measures that will help people get into new jobs and to make sure that there are jobs available. You will see us taking action in the New Year.
Question:
Prime Minister given what you are saying about the scale of the world’s economic problems and the need for people to get together, how important do you see the role of the European Union? Do you really think it is proving as effective as it should be in this current situation, and are you worried that a comparatively small country – the Czech Republic - is taking over the leadership of the EU on 1 January, particularly because the Czechs don’t seem to share your view of the right nostrums?
Prime Minister:
Well it is interesting. I met the Czech Prime Minister yesterday, we had a meeting, we had lunch, we talked about the issues. Yesterday at the press conference he said that he shared the same view that there was a need for fiscal action, a stimulus across Europe. And I think that Europe has shown by its decision a few days ago that people, perhaps of different political philosophies and with different political traditions, are coming together to say monetary policy can do so much, interest rates can come down, but you also need coordinated fiscal action. And I think it is very surprising that the debate in Europe is in many ways resolved. It is the skill of the fiscal action that is now the issue, not whether there should be fiscal action, and that debate will reverberate around the world as America at the same time takes action in the next few weeks when President Obama brings in his stimulus package for the economy. So I feel that Europe and America are capable of working to deal with these issues. I mean of course there are problems, the American interest rate is virtually zero, the European interest rate is still 2.5%, but I think on fiscal action people are coming together and I believe that the Czech Presidency is determined to work with all of us so that we have a coordinated approach.
Question:
Back to this special relationship, bearing in mind the fact that many people in Britain think his Presidency has been a disaster, how would you assess the legacy of George Bush?
Prime Minister:
I think that when the historians look at what happened in America and the contribution of President Bush, they will focus on the big issue of September 11 2001 where the world after that changed. And I don’t think we should forget that America took the bold decision to lead that fight against terrorism, which led to us having to move into Afghanistan to deal first of all with the Taliban and then to deal with al Qaeda. So I think the historical approach, the problems that America was confronted with after September 11th, will recognise that there was a unique set of circumstances that they had to confront and I think President Bush will be recognised as someone who took terrorism very seriously and took action as a result.
Question:
You have mentioned about the institutions built in the ‘40s being outdated. What can be done to reform the UN? And do you have on your mind to sort of institutionalise this G20 as a function that would be capable of dealing with the issues of these global problems?
Prime Minister:
The world is going to have to do things better. You have got to recognise when you are dealing with an economic crisis that only seven or eight countries meeting together is simply insufficient to deal with all the problems that we face, that we have got to involve China, and India, and Latin America, and Africa, we have got to involve the different continents in a solution to these problems. So you have got to change the financial architecture, and change is already evolving. But I think we need better institutions to deal with these problems. If your problems are global then you have got to have a means by which you have coordination at a global level to solve these problems. It is a very simple proposition. And so if you are trying to deal with a global financial crisis you have got to look at the effects on all countries and what you can do to deal with the sources of the problems across he world, and not just look narrowly at what one country is doing or one country is not doing.
The argument for the reform of international institutions is that we are now entering what I believe is the era for global society. The very fact that people can communicate across frontiers by email and texting and millions of people can do it every day is breaking down all the traditional barriers and leading people to find out they have far more in common than they ever thought they had, that what divides them is far less than they had thought, and foreign policy can never be the same again if you have people texting, and emailing and blogging about what is happening in individual countries that are isolated from the world by the decisions of their regimes. People get to know what is happening and people express their views and they build up a public opinion against it. So you are going to have to deal with this global society by building better global institutions. And I think on April 2nd when we have the G20 meeting, it is the start of a process of getting the institutions in place that are equivalent to meeting the challenges of this new global society.
In the 19th century we had to move from essentially local economies to a national society with national institutions in many countries, and after that in others. Now we have got to move from a situation where we have purely national or even regional institutions to recognising that even the global institutions that were built up years ago have actually got to be fit for purpose for our times.
Question:
Can you confirm reports that you are looking at a scheme to lend public funds directly to businesses to help them through the credit crunch?
Prime Minister:
We are doing that at the moment and we are extending it. We have got a business guarantee scheme that is at least a billion pounds at the moment. We have got an export credit scheme that goes direct to businesses, that is worth about a billion pounds. And we are doing other things worth many, many hundreds of millions of pounds, the deferral of tax and everything else which is in a sense money postponed, payment postponed to the government for money that is to be paid to the government. So in a whole range of areas, including using the European Investment Bank system of providing loans for working capital for small businesses, we are doing that. The question is how far we extend that over the next period of time and we are looking at measures that can do that.
Question:
Can I ask you, FIFA are today expected to give their support to a Great Britain football team for the 2012 Olympics. What would you say to the SFA who have said that they are opposed to it because it threatens the long term future of the Scottish and indeed English, Welsh and Northern Irish football teams. And could I also ask what you would like for your Christmas?
Prime Minister:
We have our Olympics team for the 2012 Olympics, [indistinct] football team from Britain. Look the issue here is very clear. We are hosting the Olympics in 2012, but at the moment, despite the fact that football is an Olympic Gold medal winning sport, there would be no UK football team in the 2012 Olympics. And the issue then is whether we can resolve this, guaranteeing the independence of the Scottish Football, the Welsh Football and Northern Ireland Football Associations, at the same time making sure that at this unique occasion when Britain is hosting the Olympics we can have a team, and whether there is a way round the problems that worry the Scottish, Welsh and Northern Ireland Football Associations. I think there is a way round this problem and I think the way round this problem can be found if people can get round the table and discuss it. And there are already a number of suggestions about what can be done, that we would hold the first match in the football tournament in Scotland is one of the suggestions. Sebastian Coe and I have talked to Alex Ferguson about the possibility that he might want to be the manager. So there are a number of suggestions being made and I think over time people in Scotland, Wales and Northern Ireland will see the benefit of this unique sporting event that is coming to London, this unique event that we would not have a football team from our country represented, making sure that that can happen. And I would urge people to look in detail at the proposals that I believe - from what I know, and I have talked to Sebb Blatter at the FIFA - guarantee the independence and the continuing representation of the Scotland, Wales and Northern Ireland Football Associations in all international tournaments.
Question:
This week you announced the withdrawal from Iraq of troops [indistinct] I think that the new President Obama will put more effort into troops in Afghanistan. And the Japanese government has a restriction of sending troops in foreign countries. I would like to know what kind of contribution do you want from Japan and how long does it take for Afghanistan to be [indistinct]
Prime Minister:
This is a matter for the Japanese government, but we have a 41 nation coalition in Afghanistan. We have just announced more troops for the next period of time to deal with the problems that we are facing in Central Helmand. I do want to see the widest possible burden sharing and I do want to train up the Afghan soldiers themselves to be able to protect their own country over time, and that is why a lot of our work is training the Afghan police and army, and will continue to be so. But it is a decision for individual countries to make as to what they do.
Question:
Prime Minister, a question about the credit crunch and schools. There are some reports that parents are moving their children from private schools to other schools. I just wonder what is your opinion about that and what kind of effects can we see in the school system?
Prime Minister:
I think we have got to wait and see what figures are produced at the end of the year. I think it is too early to make a judgment about what is happening there and I think that we will get figures later on, probably next summer, that will tell us what is happening. I think the most important thing to recognise is that in Britain what happened over the last year is that all people’s standards of living were hurt by the rise in oil prices, the rise in gas and electricity bills, about which people are very angry indeed. They want to see action by the gas and electricity companies to bring down the price of gas and electricity now that the gas and oil prices have come down, and of course food prices were going up. So people’s standards of living were being hit. Now we have a situation where for people in work with the income that they have they are seeing that they are paying less for their petrol, less for food and of course mortgage prices, mortgage rates are coming down. So you see a changing situation. And as we come into the new year when the pension goes up, when child benefit goes up in January, when a further tax reduction comes in in April, on top of the VAT cuts, then people will have in my view more spending power as a result of that. So that is the background to any decisions that people make about the future. But I think we have got to wait until we see what statistics are produced at the right time.
Question:
Prime Minister can I ask you about preparing for the future. Tony Blair wrote to David Cameron and told him that from 1 January 2009 the Tories would be able to have meetings with civil servants. Do you feel that you are bound by that undertaking that your predecessor gave? I understand the Tories have already been in touch to request such meetings. Gus O’Donnell says it is up to you. Are you going to grant David Cameron’s Christmas wish?
Prime Minister:
I will be replying in due course. I can’t remember when the last letter arrived. We will reply.
Question:
Recently [indistinct] held a peaceful election. As a Commonwealth country do you think Britain might have learnt any lessons from the successful holding of elections in Ghana, such that it would be unnecessary for Britain to continue supporting dictatorships such as Uganda, Mugabe and President Musharraf?
Prime Minister:
Well you are absolutely right about the importance of free and fair elections, you are absolutely right about what has been achieved in Ghana and I would commend the practices of free and fair elections for countries like Zimbabwe, and it is clear that it didn’t happen there and that is why a lot of the problems we have got will remain until the democratic will of the Zimbabwean people is upheld.
Question:
I am struck that over the past hour you have been asked a lot of questions about the economy and you have emphasised your confidence, you have said twice now that people who are in work will be better off. Every person watching this news conference has heard the most extraordinarily gloomy forecast about the next year and not once have you talked about the bad news to come. Is that because you think the gloom is over-stated, or is it because you think it is your duty to talk up the economy and not to talk it down, because isn’t there a gap between your mood and everything else that people are hearing about the economy?
Prime Minister:
Over the last few months I have been dealing with the tough times that we are in. I have made no secret of the fact that we have difficulties with unemployment, with people who are worried about their mortgages and businesses, that are worried about their ability to survive. And all our measures are designed to deal with these three major problems that are affecting confidence in the economy. The three problems are: people worried about their mortgages, worried about their homes, and therefore we are dealing with how we can help people stay in their own homes by action that we are taking against repossessions; people are worried about their jobs and while I cannot stop unemployment rising, as it has, we are putting in place the best service possible to help people to get jobs and to move from jobs that are not available to jobs that are available for the future, and to give people the new skills for the future; when it comes to businesses, I am optimistic about the long term prospects of the British economy because we are in those area which will expand as the global economy expands, like the creative industries, like the advanced manufacturing, like pharmaceuticals, all these areas. Education is a big business now selling to the rest of the world. We are in all these areas that are likely to expand in the future and I have got to help our businesses get through this difficult time so that they can get the benefits of the next stage of global economic development. The global economy will return to growth, so there will be higher growth in the future. You will have Asian consumers from China and India wanting to buy British goods and we have got to make that transition by helping people through these difficult times.
So that is why I am saying today we will help people through the downturn and we will do so in the ways that I have just described. But I am also saying that the decisions we make now to help people will also be about how we can build for the upturn because I am confident that if we can provide the skills and the investments that are necessary British people and British businesses can do well in the future. I don’t take away from the problems that we have had. This has been a fundamental crisis of the banking system, this is the first financial crisis of the global age, but it is in a sense the birth pangs of a new global economy developing at pace and putting new priorities for us to follow. And if we can make the right decisions now then we are better prepared for the future and you will see in January the decisions we have made on transport, on infrastructure, on energy and on climate related investments, and of course on skills and jobs are the decisions that are essential for the future. And you will see us making, as we have done with the Royal Mail, further decisions about government assets that are necessary so that we can concentrate and focus on how we can invest fully on what really matters for the future.
So yes we have difficult times, and there are difficult times ahead, but I also believe we can take this economy fairly and safely through this downturn. [Indistinct] that happened in the past and allowed people to suffer without giving them the possibility and indeed the reality of government help for them and for their families, and that is what I intend to do over the next few months.
Thank you all very much. Have a good Christmas.
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