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In a government press briefing the Minister without Portfolio, Dr John Reid, answered questions from journalists on a number of issues, including the terrorist attack in Kenya and the Pre-Budget Report.

Read the full transcript below:

Dr Reid:

Good Morning Ladies and Gentlemen. First of all, as Jack Straw did this morning, I would like to give our condolences for those who were killed in the terrible tragedy that occurred in Kenya. Obviously our thoughts are with all of the families and it is an action that has to be utterly condemned by all civilised people and nations.

I have just come from the Cabinet. I don’t know how much the Prime Minister’s Official Spokesman has told you, but among other things this morning we discussed the pre-Budget report and obviously the fire strike was mentioned and discussed. On the first of these, yesterday the Chancellor set out in the pre-Budget report the reality of the global economic situation. No-one is immune from that, but he showed that the British economy is the best placed of all the industrial nations, that is by choice, by hard choices which have been made, not by chance, the best place to withstand the world economic downturn, and I am pleased, as my Cabinet colleagues are, that we are continuing our investment in health, education and law and order because we are strong enough to do so despite the world recession. But we can only go ahead with those programmes because of the government’s decision to bear down on inflation above all and get the public finances on a proper footing. This year we have had the lowest inflation that we have had for some 30 years, unemployment has been its lowest for 25 years, it is lower obviously than Japan, America and the Eurozone, and mortgage rates have not been lower than they are now since the 1950s. So as the Chancellor made clear, this government will not do anything that would put that hard won economic stability that we have here in Britain at risk.

It is against that economic background that the current eight day fire strike continues, thankfully now nearing the end of those eight days. Can I take the opportunity first of all to thank the public for their continued extra vigilance throughout this period. All of the simple steps that have been recommended, such as checking the batteries in domestic smoke alarms, are important at all times, but particularly important at the moment and we are very grateful for the assistance that the public have given us. Obviously I would also want to thank the troops who have risen excellently to the difficult task of providing emergency fire cover.

This morning the Prime Minister told the Cabinet that he will be asking for a detailed assessment this weekend of how the police and Army have coped with the eight days of the fire strike. That report will be published and it will be published early next week. In particular the Prime Minister is interested to discover just how the joint control rooms have worked in practice and if they are a sensible way forward. Now I know that John Prescott has among the continuing discussions that he is having with people, also taken the opportunity today to visit and to thank staff working in one such centre, I think that was at Chelsea Barracks. In addition this morning the Home Office Minister, Bob Ainsworth, visited Devizes in Devon where a new joint control centre for police, ambulance and fire calls was agreed upon locally, equipped as it is and it is ready for use, but the Fire Brigades Union national leadership have instructed their members to refuse to work there. It seems to me that joint control rooms and emergency services working most closely together can deliver improvements to the public in this vital area, but no doubt the report which is put up to the Prime Minister next week from those who have been involved in the practical side of this operation will be of interest.

I would make it clear once again that we very much value the work of the fire-fighters. We understand their desire for more pay. We are keen to see that responded to, but we have always said - and I repeat here - that any increase above 4%, which is in itself generous, twice the rate of the going rate of inflation almost, must be paid for by modernisation and tomorrow’s talks, as you know discussions start again tomorrow, must reflect that reality.

Question:

Wouldn’t the people have a lot more respect for the government if the Chancellor could simply say I got it wrong, sorry?

Dr Reid:

I think what people have a respect for is a government that is capable of delivering an economy that is sufficiently strong to withstand what is a global recession far better than any of the other industrialised countries. And when I read this morning some of the comments about prudence, I remembered that Gordon Brown has said all along that it was prudence for a purpose. One of the purposes of that prudence was obviously to continue investment in the services that are so valued by people in this country; but the other purpose of course is to be able to withstand far better than any of our competitors the effects of a global recession. No-one is completely immune from that, but in an economy where we have reduced the national debt to the extent we have, and to a far greater extent than any previous government, and to a far greater extent than any of the other industrialised nations, when we have maintained extremely low unemployment and particularly low inflation, then I think that people recognise that while we can’t be immune that we are in a far better position than we otherwise would have been to withstand those difficulties.

Question:

… and monetary framework in the UK, talked about the steady hand and long term strength of purpose of the Bank of England in managing monetary policy. Isn’t it a fact that the way in which the Chancellor presented that has now effectively closed the decision on the euro in this Parliament? It would be inconceivable for the government to go into a referendum campaign without the No Campaign throwing back at the government, if it wanted to go into the euro, so much of the language that the Chancellor used yesterday?

Dr Reid:

No, the Chancellor made plain yesterday that the position remains that we will see what result comes from the application of the five tests and that we will make a decision on that by June of next year. Nothing has changed as far as the government’s position is concerned.

Question:

Isn’t it the case that if you agree to pay settlements which are way above the rate of inflation, even if they are paid for by changes in working practice, that is in itself inflationary and you are doing that in the Health Service and you are about to agree to that in the fire service too.

Dr Reid:

Well first of all your premise is wrong. There has to be something for something, so if there are rises above inflation they have to be linked to modernisation. That has been the case in all of the pay settlements that have been agreed in the past. I won’t make any specific comments on the reference to the health workers. Suffice it to say there have been long and detailed discussions on this, they have covered not only pay but modernisation and modernisation is not just a matter of greater efficiency, though it is, it is also a matter of giving better career opportunities to those people who want to get ahead on merit, about rewarding competence as well as efficiency. I won’t speculate on your assertions that either there is some great inflationary pay increase just agreed and about to be announced, I don’t recognise some of the figures that have been mentioned this morning, let’s wait and see what happens on that when the announcement is made. And as far as the position on the fire-fighters is concerned, I cannot be more clear, we have said consistently that if there is to be extra money over and above what the employers say is already there, that is 4% which is in itself generous, then that has to come from savings in efficiency and modernisation. None of that is inflationary. Why? Because we have taken some very difficult decisions, at times we have courted some unpopularity, not least in the first two years of this government, precisely in order to get a stable economy with tight fiscal and monetary rules, with low unemployment, with low interest rates, low mortgage rates, and we are not going to put that at risk by rewarding inflationary pay increases, because that is the one certain way not only to get higher mortgages but to lose tens of thousands of jobs throughout the economy.

Question:

But it doesn’t matter how these things are paid for, if there is a headline figure way above the rate of inflation the government is agreeing effectively to a going rate in the public sector which other people will seek to match, however you pay for it.

Dr Reid:

I presume your question is based on speculation in this morning’s papers about figures that I do not recognise. Let’s wait and see what the figure is when it is announced over the health workers and let us recognise that the discussions that have been taking place are not just about pay, but about changed working practices, modernisation in the Health Service across a million workers which are intended not only to give better value to the patients but better prospects and career opportunities for those inside the Health Service itself.

Question:

Is John Prescott now in a position, following Cabinet, that when he sees the employers he can say to them that if the thing is properly costed, if you are convinced that the modernisation is going to come through, then we are prepared to consider some small amount of transitional help on the funding? And if I can just go back to the point you have made about these joint control centres, the emphasis you are now putting on that would seem to suggest that that is now seen as the main area for cost saving. Or do you think to come to anything like the 16% figure they have also got to give on the overtime ban?

Dr Reid:

On the first question, as Bain himself said, Bain is due to bring forward a fuller report over the next 2 - 3 weeks, as he himself said this is to be self-financing. As everyone who has been a spokesman for the government has said, anything above the money the employers say they already have allocated, has to come from savings in modernisation. So before we start talking about transitional payments or payments on the journey, just let’s get the route map down. We have to see where this money is coming from. It is my view that because of the length of this dispute, the nature of the dispute and the huge size of the initial pay claim, there is a degree of scrutiny which has been and will be given now to these issues of modernisation by the public and the press and certainly now it has been brought to this stage by the government, which will mean that these matters will have to be addressed, they will have to be tied down and we would have to be quite clear that any savings which are going in to extra pay will have to come from changes in work practices. Now that is the case and I think people will be asking the further questions that they are now asking, about for instance, joint control centres. On joint control centres I think people will find it eminently sensible that where the public can get better value and a better service by people working together, they will want that to happen. People don’t want glass ceilings to be a barrier to effectiveness, they don’t want glass doors and glass partitions to be a barrier to effectiveness either.

Question:

Inaudible.

Dr Reid:

Let me just spell out some of the things that were in the paper last Wednesday - flexible working, people do not understand why it is that part-time fire fighters have to arrive in a different fire engine, that people can work together but they can’t travel together; people cannot understand why there could be an overtime ban since The Queen’s Silver Jubilee and still be in place at the Golden Jubilee; people want flexible working and they want that right across the public sector. And what I am saying is that I think that because of the size of the claim that was put in and the length and nature of the dispute, I think it is natural now that the public are asking more questions about these working practices than might otherwise have been the case, but it is across the whole range of them.

Question:

… than they would have done at the start of this dispute, are you saying that they have made the price of this dispute more expensive to themselves?

Dr Reid:

No, what I am saying is that we have made plain all along that anything above the figure that the employers said they had, has to be paid for by savings and I think there has been over the past week or two an increasing scrutiny by the press and by the public, an increasing interest in where these savings might come from and whether the things that have been suggested are reasonable or not.

Question:

You say you are not going to take risks with the economy, but isn’t that just what Gordon Brown did yesterday when he announced very high growth forecasts for two or three years ahead and isn’t what he is doing effectively gambling by borrowing now and it is going to be paid back by high tax receipts later which he might not get?

Dr Reid:

No, I think that given the stability that the government has brought to the British economy, we are far better placed than any previous government. For instance the last government was borrowing up to £80 billion, as opposed to 20, and in a situation where they had higher inflation and massive unemployment. So we are far better placed than previous governments were, we are far better placed than any of our competitors when you consider the reduction in debt. And thirdly and probably more important than anything, that the borrowing announced by the Chancellor yesterday from £9 up to £20 billion, and the other borrowing limits which he outlined, are encompassed and completely within the envelope of the golden rules which he mentioned at the beginning of the this government and which we have adhered to all along. As you know those rules are first of all that borrowing should be for investment, and people can see the level of investment that is going into our public services and elsewhere; and secondly that over the economic cycle that the borrowing level should be at a sustainable rate and the rate of borrowing is a good bit beneath 40% of GDP which is what most people would regard as a reasonable and sustainable rate.

Question:

… alone means the loss of 5,000 jobs, can you rule out significant job losses?

Dr Reid:

Well first of all on that I don’t know where the figure of 10,000 that was quoted came from. What John Prescott said the other day was a statement of fact, in fact it was a statement of two facts. One is that as a result of the huge recruitment after the 1977 strike we are coming to a bulge in which 20% of the fire-fighters will be retiring over the next few years, and secondly that could even be higher because as you know up to 70% of fire-fighters retire even before the age of 50, which is where they get the two-thirds pension, on ill health.

Question:

People want to know are you going to replace those jobs because you seem to be equivocating on that.

Dr Reid:

No I am not equivocating, what I am doing is correcting a misapprehension, a misrepresentation that has been in some media coverage. The second point is the point that you raised. We did not set out by saying this is about job cuts, this is about increasing productivity, giving a better service to the public and giving better value. Now everyone who works in any workforce throughout the United Kingdom recognises that when you carry out modernisation you could end up producing a better service and better value with the same number of people, or you could end up producing the same, or better, service with a smaller number of people. That is partly what productivity is about. Now those things have to be decided and they have to be negotiated, but what is clear is that any pay increase above what the employers say already they can afford, has to be paid for by those increases in value and those efficiency savings. That has been clear throughout. It is clear from the time Bain published his proposal where he said that these changes have to be self-financing.

Question:

Inaudible.

Dr Reid:

On the first two, which will mean that I can’t answer your third, on the first it wasn’t discussed at Cabinet. I am not quite clear, perhaps the Prime Minister’s Official Spokesman could confirm whether there is a statement at 2.00 today.

The Prime Minister’s Official Spokesman:

Inaudible.

Dr Reid:

We don’t know at the moment and anyway having thought of it it would be inappropriate for me to share secrets with you that Parliament have got to be told first. The Prime Minister’s Official Spokesman can do that.

Question:

… Pre-Budget statement to the CBI first?

Dr Reid:

I was teasing. The answer is it wasn’t discussed and I don’t know, so if you want another go and have a question I am happy to try.

Question:

… on the issue on British Energy.

Dr Reid:

My feelings, you will not be surprised to know, I have come independently to exactly the same conclusion as Brian Wilson and Patricia.

Question:

If the government’s record is so good on inflation, why are council taxes going up by 16%?

Dr Reid:

The government’s record on inflation stands I think comparison with any previous government. We now have the lowest inflation that we have had from 1964 I think, and we have got the lowest interest rates that we have had since the 1950s, we have got the lowest employment we have had for 40 years. The question of the council tax is of course ultimately a question for the local councils themselves and I think what you have in the pre-Budget statement is an estimate of the income and the revenue which comes in. But the question of how much is levied by a council will be for individual councils themselves.

Question:

The Chancellor revised downwards his growth figures for this year but was surprisingly buoyant in his projections for next year. Was it the accepted view of the Cabinet that we can see the green shoots of recovery coming as soon as next year?

Dr Reid:

I think in general the Chancellor’s forecasts have been pretty good, notwithstanding those areas where up until this year he has sometimes been at odds with the majority of the forecasters. In fact his forecast of 2.5% for this year coincided with the view of roughly two-thirds of all forecasters.

Question:

Inaudible.

Dr Reid:

Two-thirds of the forecasters from last year were within the range of outline of growth that the Chancellor laid out last year.

Question:

… was the average among the forecasters?

Dr Reid:

Sorry, I think you are misunderstanding what I am saying. What I said was that when Gordon made his forecast of 2.5 last year, two-thirds of commentators who were making forecasts fell within the range that he laid out for us. You are right that we forecast 2.5, and I wasn’t talking about the average, I was talking about two-thirds of those who were making forecasts, not the average forecast of those who did it.

Question:

We understand each other.

Dr Reid:

Good. Now what has happened is that actually the United States is beginning to come out of recovery, they are beginning to come out of the position they were in and there are signs of recovery there. It is less so in Europe, particularly in Germany which is hovering in a very difficult position, but given the track record up until this year of pretty accurate forecasting, and the fact that our forecasts both tend to be on the cautious side and independently audited by the National Audit Office, we think that we have reasonable grounds for forecasting the sort of growth that we are doing. We are also, I would point out, within the envelope of borrowing for our second golden rule with a little bit of leeway in there. So we have no reason to accept that those forecasts will not be reasonably accurate.

Question:

Do you have anything to say on the report in the Guardian about comments by Foreign Office sources on Downing Street’s policy on the Middle East?

Dr Reid:

I don’t have anything to say on anonymous sources, I don’t know who is supposed to have said this. Our position is absolutely plain on the Middle East. We believe that this can and must end by negotiation, we believe that those negotiations should be based on two principles, which is that the state of Israel must be recognised and secure within its own borders, and that the Palestinians must have a state which is similarly secure within its own borders. I can say as someone who has been in Northern Ireland at the end of a conflict that has lasted on and off since 1169, that I know how difficult it is. Even five years after the last person has been killed by the Provisional IRA, and some years after the last group of people have been tragically massacred by the dissident IRA, the dissident Republicans, I know how difficult it is to get people to speak together, so it must be hugely difficult for people to sit down together when they have seen their colleagues and comrades and friends and family killed not five years ago but five hours ago in some places. Nevertheless the whole of history teaches us that these things will only be resolved by negotiations, and that is why the Prime Minister some time ago said that he personally would like a conference convened on this matter, and I still think that those like the Prime Minister who are trying to get people to speak together rather than to kill each other, will ultimately be the ones who resolve this difficult position. Now if other anonymous people have comments to make on it, I don’t intend to respond to that.

Question:

… can you confirm that there is going to be a conference before Christmas perhaps?

Dr Reid:

Yes we are looking at plans now to have a conference. The Prime Minister would like to bring the various sides together to discuss these matters. How and when that might be done is a matter for discussion.

Question:

Inaudible.

Dr Reid:

How and why it might be done is a matter for discussion.

Question:

… the fire-fighters’ strike was about jobs, but jobs was one of the modernisations. Because frankly to say now that a 40% claim is the reason for that to be now on the agenda takes a bit of believing, certainly by the fire-fighters. Even if you don’t accept that, would you accept that now the dispute is as much about jobs as it is about pay?

Dr Reid:

In actual fact, where the fire-fighters’ pay claim started was not about jobs from their point of view, was not about modernisation, it was not about new working practices, indeed they had set their face against them, as they had for 20-odd years. What happened was that the formula, which for all of those decades they had found acceptable, and remember that through the 18 years of the last government there was no industrial dispute, the last industrial dispute and strike of the fire-fighters was again under a Labour government. What happened was that the fire-fighters decided that they didn’t want that formula and they therefore opened up the question of exactly which formula would replace it, but before they would sit down with a formula they said we want a 40% pay increase.

And it was made plain right from the start that there was no chance of such an increase, 20 times the rate of inflation, and that any pay increase above the sort of figures which the local authorities said they could provide, had to be tied in with changes in work practices that had been resisted for decades but now clearly had to be seen to be the basis for producing savings which could then be redistributed in terms of additional wages. Now where the question of jobs comes in is that if we were to consider, after all of the pain that we have gone through to get the economy right, if we were to consider hyper-inflationary pay increases, unlinked to productivity, there would be such a knock-on effect in this economy that we would have massive job losses, but they wouldn’t necessarily be in the fire service, they would be every other worker who is the 1.3 million workers who are now working, who were not working when this government came in, as a result of that strong and dynamic economy. So no responsible government could have ignored this. As it happens, because of the size of that claim and the nature of the dispute, people’s minds have been increasingly concentrated on the nature of these working practices. That apparently was not the intention of the Fire Brigades Union leadership when they started off, but it is certainly the effect of the size of the claim and the length of this dispute.

Question:

There was a suspicion however before the strike that the government was ready to use the blip in retirement to get job losses.

Dr Reid:

Look, it is difficult for me to comment on anonymous sources and what you call suspicions. The people who said the formula was not acceptable, the people who put in the 40% claim, and the people who then said but we don’t even want people to talk or think about works practices, was the Fire Brigades Union. They did that. John Prescott has worked for some months to try and find a formula, a negotiated formula, which would provide the basis between the employers and the fire-fighters of giving above inflation increases which were clearly linked to productivity. But there is no doubt in my mind that the magnitude of their claim, the length of this dispute and their refusal to countenance any changes has, whatever was originally intended, concentrated the public’s mind on some of the practices, like the 25 year overtime ban, like the refusal to work with other emergency services, like the story about the glass windows that have to separate one group of workers from another or they will not work, like the fact that part-time fire-fighters have to arrive in a separate engine, all of those issues are now coming under public scrutiny, whatever was intended at the beginning.

Question:

Do you think the Chancellor’s reputation now lies in tatters after yesterday’s pre-Budget statement? And also do you think after yesterday his chances of becoming Prime Minister are greater now or lower?

Dr Reid:

On the first one, I think the reputation that Gordon Brown has got as Chancellor is undiminished by the fact that of all the nations in the world which are industrialised, which are modern economies, the British is perceivably in a better position to withstand the potentially terrible effects of a global recession than any other one. In that, as I said earlier, when Gordon used to say prudence with a purpose, we can now see one of the purposes, and that is that as you go through these cycles and you meet unexpected events, and we have had unexpected events, I don’t think people would have predicted the huge fall in shares and the various other things which have affected business confidence, despite all that and despite the fact that Germany is hovering in recession, Japan has been in a terrible way, the United States has been in recession, despite all of that we have continued to grow, we have an extremely low national debt, we have extremely low inflation, extremely high employment, and we are borrowing well within the golden rules.

Now if people look at that rationally I think that the foresight of the Chancellor has been vindicated. As regards speculation on future prospects of any of us, I think that is a very unwise thing to do and I think the Chancellor was absolutely forthright in his view that he is not interested in any of that speculation, as he said on the radio this morning, he is concentrating exclusively on being a good Chancellor and that is paying rewards because he is a very good Chancellor.

Question:

Inaudible.

Dr Reid:

Absolutely. Right, I am very grateful for you all being here, thank you very much indeed, and the next time I will try and get a question that I can answer Adam for you.l transcript below.

Extra info

Read in full previous government press briefings by:

• Secretary of State for Defence (20 November)

• Secretary of State for Health (31 Ocotber)

• The Secretary of State for Wales(30 October)

• The Foreign Secretary (23 October)

• The Deputy Prime Minister (17 October)

• The Home Secretary (14 October)