Prime Minister's Webcast on the Extreme Weather and Fuel - 2 November 2000

I'm recording this webcast just before I go to see for myself the severe damage that the recent storms and torrential rain have caused and are still causing - to large parts of the country.

Despite the remarkable efforts of the emergency services, thousands of people have seen their homes flooded, their possessions ruined and their lives disrupted. Sadly too, some lives have been lost.

It's not possible, of course, to be sure these storms are the result of climate change.

But the increasing frequency of such extreme weather here, in the rest of Europe and around the world, does lend support to those who say that global warming is no longer a theory but is a daily fact of life.

And, of course, in and immediate and practical sense there are lessons to be learnt from the flooding and the havoc caused.

We must see, for instance, how flood defences can be improved to help existing communities.

We must also ensure that threat from flooding is given more serious consideration in planning any new development.

The Government for it's part will carry on working with the emergency services, local authorities and others to try and make sure that we have the best possible defences against these changes in weather that we can have. And on an international as well as national level, we will continue to give the lead on tackling the issue of climate change.

Let me turn also to the other big issue that is concerning people which is in respect of fuel and the possibility of fuel duty protests over the next few days and weeks.

I believe that no government could possibly give in or yield to the types of demands that are made by some of the fuel protesters. But I want to address myself instead to the issue of the demands themselves, because some of these demands which range from anything from a 15p to a 26p cut in fuel duty, would have economic consequences far beyond those that the protesters, at the moment at any rate, are prepared to accept.

At the moment the British economy is the fourth strongest economy now in the world. And we have managed, through changes in economic management, to produce a stability which has delivered the lowest inflation in Europe, mortgage rates at half the level of the last Government, billions of pounds saved in debt repayments, rising living standards, and approximately one million more people in work with the lowest unemployment levels seen for over 20 years.

And although people talk about the Government having a surplus, and of course it's only because of the strong economy that we have this surplus, it's worth as well just remembering the last time a Government decided to treat a surplus as something that can be spent overnight. That happened in the late 1980s.

In 1989, the then Government had a very large budget surplus indeed. Just three years later as a result of them spending that surplus without thinking of the long term, we had the largest deficit borrowing requirement in any Governments history, a national debt that was on its way to being doubled, 15% interest rates, recession, spending cuts, and finally, tax rises.

So, it's not simply that no responsible government could of course make policy on the basis of people threatening so called Armageddon or blocking food supplies or so on. It is that on the actual issue itself, of fuel duty, there are constraints and limits on what the Government can do.

So I hope that those making this protest will listen to those warning of the impact of their action on pensioners, hospitals, schools and jobs, thats been spelt out very clearly, by people like the CBI, the TUC and the British Chambers of Commerce.

And I hope they will understand that we are in no way ignoring the concerns of those who say that the high cost of petrol is hurting them. And we understand that that is so, but we have to balance anything we might do to meet those concerns against the wider impact on the economy - on interest rates, on other taxes, on what we can do for pensioners or to improve our schools and hospitals.

And yes it is true that petrol duty is higher in this country than elsewhere in Europe. Although many of those comparisons, of course, are changed because of the very strong level of the pound at the present time.

But even if we accept that, that petrol duty is higher, what people often don't mention is that income tax is lower than elsewhere in Europe. Business tax is lower, we dont pay motorway tolls, our National Insurance charges are lower. Many other European countries levy VAT for example on food, on childrens clothes, and on newspapers.

Overall, Britain has the lowest tax burden of any major European country. So, of course, if we had the income tax rates or the business tax rates of other countries in Europe, or if we are putting VAT on food or other essentials, then we could give a bigger cut in fuel duty.

But, the truth of the matter is most people would not want our tax levels to be like those in those other European countries. So there is a limit to what we can do and we also have other demands for our help.

Pensioners, for example, have got a good case for more help, and if we simply changed petrol duty, we could do less for them, and less for those who also desire investment in our schools, our health service, our police and transport.

There is one other consideration as well. The economy is growing very strongly at the moment, as I say, employment levels are at their highest for this country ever, there are around 28 million people now in work in this country and unemployment levels at their lowest for over 20 years.

Even within the surplus that we have, and some of the tales of that surplus incidentally are greatly exaggerated. But even within the surplus we have, we have to make sure that any spending we make, whether its in relation to the concerns of fuel protesters or pensioners or indeed spending on our public services, is sufficiently prudent and disciplined and leaves us enough leeway for the long term, that we don't have that spending leading to a rise in interest and mortgage rates.

Because if we did that, then people might get some short term benefit but then if their interest rates and their mortgages went up then they would be worse off.

So, the cost of returning to boom and bust would be far greater for every family in the country than the recent rises in the price of petrol. Rises, by the way, which recently have been driven solely by the steep increase in the world price of crude oil which is why these protests have taken place, not just all over Europe but in other parts of the world too.

So, we will do what we can but we won't do something that is irresponsible either in respect of the economic stability and success of this country, or the key investment we need in our public services to make us a stronger, better, and fairer country in the future.