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DERMOT MURNAGHAN: Well the Chancellor has warned there are more cuts to come in this week’s budget as the world faces what he describes as its most uncertain period since the great recession but with the European referendum hanging over the government, can it afford to introduce measures which could alienate voters?  Well I’m joined now by the Conservative former Chancellor, Ken Clarke, he’s in Nottingham and a very good morning to you Mr Clarke.  First of all, congratulations apparently on your book deal, your autobiography, we’re hearing you’re going to get hundreds of thousands of pounds.  

KEN CLARKE: Happy Sunday, Dermot.

DM: Happy Sunday to you, a very good morning to you Deputy Leader.  Well let’s continue with that research carried out by Gloria De Piero and Jonathan Ashworth, a lot of it was done not in Labour’s so-called heartlands but in the so-called Blair constituencies that you won in the 90s, some of them in the south, held throughout the early noughties and are now lost and the voters are telling your researchers they have no inclination to come back.

KEN CLARKE: So I gather from one of the newspapers, that’s right.  I am being bullied by people who used to work for me, very nice people who used to work for me, into putting some of my memories of political decisions onto paper, I haven’t produced the book yet but I gather somebody has told the newspapers that this great work is on the way.  Quite how I’m going to find the time to polish it off I’m not quite sure so I won’t be spending the money in case I have to hand it back to the publisher for failing to complete the book.

DM: Well I won’t ask about the numbers but presumably it would be eligible, let me say, for the 45p rate?  

KEN CLARKE: Yes, probably, sure, I think we might sell the odd copy and I think the publisher might give me a bit of money in advance, yes, sure.  

DM: All right, well I just want to get on to some of the issues you’ll probably be talking about.  

KEN CLARKE: I thought you might.  Thank you for giving me a plug for the book.  Sorry … yes, go on.  

DM: I just want to move on to budgets, obviously you have delivered a few yourself and there’s one coming up on Wednesday, is there compared with your time, an expectation now from I suppose the public and the politicians, not least your own back benchers, that somehow budgets have to be popular, that hard choices need to be shirked.

KEN CLARKE: I don’t know if anybody has told you I’ve said that, you’ve practically taken the words from my mouth.  Yes, there is a big change from my time and that is because politics has changed so we have this short term, constant campaigning atmosphere which people like to surround politics with and the budget has rather sunk into that.  Of course budgets can’t always be popular, budgets have to be taken … you have to take decisions in the national interest.  Whether or not they are successful is going to be judged by the medium, the long term as to whether the country has been reasonably successful economically.  You are helping people run their businesses, you are helping to create jobs, you hope, and the idea that you can’t do anything that’s unpopular – all you have got to do is decide which sections of the country you are going to give money to and which sections of the country you are going to cut their taxes, is of course a rather absurd thing to do particularly as George has quite correctly said, it is a very difficult year for the global economy as well as the British.  

DM: We are hearing there is still a mighty deficit, an £18 billion black hole and other things in some of his original plans, if he weren’t to shirk the hard choices what do you think he should do? More cuts clearly, they were always in the pipeline but what about putting up taxes?

KEN CLARKE: Well I would do a combination, that’s what Chancellors have to do and that’s what I think he will have to do.  Of course you have to be political about it, you have to present it, you have to persuade your parliamentary majority to stay with you and it’s a very difficult choice.  I don’t actually know what he is going to do.  Somebody rather unwisely trailed or revealed in public that he was looking at further reform of pensions for example, about a fortnight ago.  There is a subsidy given to high rate tax payers on 45p that you don’t need to pay the tax so long as you put it into a pension fund and although you need to encourage people to save, perhaps everybody should only get the 20p subsidy on top of whatever pounds they put in from their income, for their pensions savings.  It took the pensions industry about ten days to shoot that down in flames and I don't know where he is going to turn next.  He lost 4.5 billion earlier, less than 12 months ago when the Labour/Liberal majority in the House of Lords decided to restore a welfare cut to people on middle incomes, so it is quite a tricky area.  I can think of various taxes which I think ought to be put up, can be put up but how George is going to handle it I’m not quite sure and further pressure on public expenditure is very necessary.  

DM: Well let me just ask you what you think of …

KEN CLARKE: It’s because the global economy is slowing down, that’s right.  

DM: What are those taxes you think he might be able to put up?  What about excise duties on petrol, isn’t that an open goal with the oil price so low and aren’t we meant to be discouraging the burning of carbon fuels?  

KEN CLARKE: Well the previous government was sort of committed to an escalator, putting it up every year, which George suspended.  Yes, I think he ought to look at reintroducing that because so long as the pound remains so weak, until it gets a bit stronger as it were we have got slightly cheaper oil and the oil price has collapsed internationally but the background to all this is not just is that popular, is that unpopular, what’s the politics?  The background is that we have been doing better than most other Western countries in making progress towards recovery, particularly in terms of employment we’ve done very well and living standards are starting to rise as most people’s wages are beginning to outstrip very low inflation.  But right now the number of problems facing every economy in the world are very acute, all kinds of things could act as a great shock to the economy, the global economy certainly is slowing down, markets are very jittery and if you look at the biggest problem in the short term in Britain it is we’re still running a deficit and we’re still piling up debt and that slows down the prospects of growth.  There are all the other structural changes you’ve got to make, all the things we are doing on skills, training, things like the infrastructure spending, trying to rebalance the economy – George has got to get on with that and this is the first budget in a five year parliament so if I were him I’d want to do some of the tough and difficult things now, tough and difficult in that they are perfectly desirable and necessary but you are going to have to explain why you have to raise more money or why you have got to cut back further in the particular area.

DM: Okay and is the elephant in the room here the EU referendum, Mr Osborne doesn’t want to upset his own backbenchers and the voters who he wants to vote to remain?

KEN CLARKE: Well so some of the newspapers say but there are a lot of other things the newspapers say which I don’t really believe.  I think that’s fairly irrelevant actually and we’re not going to win or lose the referendum on the basis of whether or not he’s upset some of his more right wing and excitable back benchers.  What the bulk of his back benchers want, most of my colleagues in parliament want, is to make a success of running the economy over the next three or four years, save us from further problems if we can, if there’s another world mini-recession, keep us on course to that healthy economy we’ve got to have by the end of the parliament, that’s what matters.  The referendum, once this campaign gets underway seriously, it need to concentrate on the positive reasons for being in the European Union, its effects on our politics and our economics and the way we can avoid the risks and uncertainties to the economy that will undoubtedly be created if we suddenly in the middle of all this decide to pull out of the biggest trading block in the world.  

DM: We talked about not upsetting the Conservative back benchers, what about the senior front benchers and the Prime Minister’s decision to suspend collective responsibility to allow them to campaign against his view, how’s that working out?  

KEN CLARKE: Well it’s working out all right.  I thought it was intriguing, when I was questioned about it I said if people feel strongly against it then they should resign.  It is difficult to run a collective government for four months with people openly disagreeing with the government’s policy, still holding senior posts in government but I didn’t feel strongly about it and that’s not the way we’ve gone.  The great danger in the whole campaign so far, which I think most ordinary members of the public share, is of course all reporting of it is obsessed with personalities so instead of actually reporting what any of them say, everybody gets wildly excited about anything that can be spun as an attack on another Minister.  But we’ll move on from that, I think they have to exercise some reasonable restraint, the people but we’ve got several months of this yet and we’ll be like most people, we’ll be completely up the wall if we’re not careful.  When we move on from the personalities I hope we are going to address the issues on why we’re in the European Union in the first place, what the alternative is if you come out.

DM: Mr Clarke, thank you very much indeed for your time and your views.  Ken Clarke there, the former Chancellor of the Exchequer.