PM: 'We'll cut with Germany, France and the US'
I have just interviewed the prime minister. Which is often challenging, because of his famous habit of ignoring his interlocutors' questions and saying what he intended to say all along.
And, I'm afraid to say, he didn't choose today to engage precisely and directly with my lines of enquiry.
That said, he did say two or three interesting things, about the unfinished business of reforming the banks, about when it would be right to take further action to cut public-sector debt, and about whether households should save more and borrow less.
Here are some extracts.
Peston: We've talked about the scale of this bailout. As I say, more than $2,000 of support provided by every person on the planet for the banks. What do you say to all those millions of British people who are genuinely seething when they see bankers receiving bonuses of hundreds of thousands of pounds, millions of pounds?
PM: Well, I'm appalled that some institutions are already wanting to return to the old ways - that some of our financial institutions are taking action which, in my view, is not only wrong but counter-productive in continuing - indeed, extending - the bonus culture of the past.
Now I will want an agreement - because we're talking about banks in other countries as well as banks in Europe - I will want an agreement at the G20, not just that we will have words about this, but each authority will take action. We are discussing and examining how we can have a limit on the percentage of bonuses in profits or in revenues. I think the companies themselves have now got to look at the practices that they are employing.
We have taken very, very strong action in the banks that we have some control over. It's now for the world community to come together, so that one country isn't isolated when it takes action on matters like bonuses. But, as for the current behaviour of some of the institutions, that's why I want the G20 to take action against what I think is appalling, unacceptable. And for the future of the banks - because people have got to trust them - it's unproductive...
Peston: It turned out that our banking system here in the UK was one of the two weakest in the world. The other banking system that was in as much difficulty was the American banking system. Do you have no personal regret about failing to spot that?
PM: No, I've been very clear. We should all have been supervising more. In fact, you know, you ask the question: Is the lesson of the last 12 years that we should have supervised more (which is my view) or supervised less (which is the view of our opponents)?
The choice for me is very clear. We have got to ensure for the general public of our country that they can feel that when they go to a bank, that bank can be trusted. They've got to feel that when they put money in a financial institution, that money is safe and secure. And they've got to know that the bankers or financiers that they're dealing with are taking reasonable risk but not reckless risk.
Now that is what we are putting in to all the rules and regulations that will govern the banking system for the future. So, yes, we have learned the lessons. Now I want to make sure that the lessons are learned in every part of the world, because banks are so interdependent with each other, because they're so interlinked and entangled. What can happen - as we found in the American banking system - can directly reverberate right round the world, including in Britain...
Peston: One of the contributors to a significant increase in public-sector borrowing has been the cost of this bailout we've been talking about. Your own chancellor has said that the level, the rate at which public sector debt has been increasing, is not sustainable over the medium- to long-term. When will the economy be strong enough for you to feel it's the right moment to raise taxes or cut public spending to get that debt level down?
PM: Well the first thing to recognise is if we withdrew the measures that we are taking at the moment, which are underpinning the road to recovery for the economy, it would be very dangerous. This... recovery is not automatic. This is a fragile economic situation...
Peston: As and when you perceive that the economy is strong enough to cope with the kind of decisions that you'll need to make to get those debt levels down, do you know in your own mind yet which spending programmes in your view can be sacrificed?
PM: I think we're pretty clear. That there is a deficit reduction plan we've already announced. That means we're raising the top rate of tax, as everybody knows, of income tax; we're removing a lot of the previous tax reliefs that have been generous, but...
Peston: It's not enough though, is it?
PM: ...you cannot justify in a period of difficulty. We're raising national insurance by half a percent. These things are being done so that we can pay for our public services, while at the same time making sure that the economy continues to reduce the deficit. I think you'll end up with a situation where the debt levels in all major countries are roughly the same - Germany, France, America and Britain - and I think you'll get an agreement amongst all these countries about the right timing for us to take the further action that is, that is necessary...
Peston: Do you think people need to change their borrowing habits?
PM: I think... I think I would put it another way. I think the banks have got to be more responsible in the way they approach people. I think the banks have got to make sure that they don't get into a position where they're using instruments that put the institutions at risk. And I think customers themselves obviously will want to be prudent in the way that they deal with their own finances...
Peston: I mean, on a personal level, when you were chancellor did you worry about the way in which particularly household sector indebtedness was increasing - individuals were borrowing more and more and more?
PM: Well, I've never been someone who myself has been interested in running up personal debts or borrowing huge amounts of money. But at the same time, I think you've got to recognise that when people buy a house, for example - and that's where a huge amount of the borrowing occurs - they're doing so on the basis that they can pay back that money over 15 or 20 years, they're getting a valuable asset.
So there you have it: the prime minister doesn't like borrowing personally, but understands why others do; he'll wait for Germany, France and the US to cut their deficits before taking further steps to reduce the British national debt; and reforming the banking system is seriously unfinished business.