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Britain's Finance Minister Takes on Financial Demons; Bribery Charges at Daimler

Aired March 24, 2010 - 15:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: He calls it a budget for recovery. Britain's finance minister takes on his financial demons with one eye firmly on the U.K. election.

Bribery charges embarrass Daimler. We investigate the dos and don't of corporate behavior.

Running out of credit, Portugal's problems get deeper and there is a ratings cut.

I'm Richard Quest, we have a busy hour ahead because I mean business.

Good evening.

Britain's finances are stretched very thin, but they're in better shape than we had been lead to believe. And like that famous battered red briefcase the Gladstone Box, of 1859, Britain's Finance Minister Alistair Darling brandished the box on his way to deliver his budget to the House of Commons earlier.

The chancellor told the House he won't need to borrow as much money as he had forecast. For this current financial year, which ends in April, the government is borrowing around $250 billion. That is equal to about 11.8 percent of Britain's annual economic output, the GDP. It is still a record, but it is less than he predicted just a few months ago. The borrowing numbers for future years have also been revised downwards, and that means not only that, of course, 11.8 percent GDP, but in the future the total net debt will be $100 billion less than the government had forecast a few months ago.

We are weeks away from a national election in the U.K.; the finance minister stressed the recovery remains fragile and he took every opportunity, believe me, to try and persuade voters to stick with this party.


When I presented my budget a year ago, world leaders had just met in London to agree on unprecedented action to rescue the global economy. Governments of all political colors acted to stabilize their banking systems and to use fiscal and monetary policy to boost demand and to protect jobs. Now, not every one here supported the action taken.


But with hindsight it is even clearer that the right calls were made.


QUEST: Over the course of the budget process, these are the documents that people were pouring over. The chancellor reveals he did have a few extra pennies in the pot thanks to the tax on banker's bonuses. And having a little extra cash to spend was no bad thing with an election around the corner. Jim Boulden is outside the House of Commons.

Now, Jim, we don't need to enmesh ourselves in the minutia of the British budget, but in the broad brush strokes, what did he have to say in terms of the strength of the economy.

BOULDEN: Well, the important thing I think from this 200 plus budget document that was released today, was that his claims, as you say, that maybe things here aren't as bad as they expected for 2010. Unemployment not as bad as expected. They won't have to get as much money from the bond markets as expected and there was that little bit extra money there.

And they got it, as you say, Richard, very interestingly from the tax on the bonuses of bankers. You'll remember he started this in October of last year, and they said that they might raise a half a billion pounds, about $1 billion, from doing this. But that was the big surprise, when Mr. Darling said to the parliament today that they got a lot more money. Let' s hear that.


ALISTAIR DARLING, FINANCE MINISTER, UNITED KINGDOM: At the budget report, I put in place a one-off 50 percent tax on the excessive bonuses of bankers. I made it clear that banks had a choice of whether to pay bonuses or not. But if they did, given the amount of taxpayer support that had been provided, I believed it was right that the country as a whole should benefit. I can tell the house that this tax has raised 2 billion pounds, more than twice as much as was forecast.


BOULDEN: So, you hear those cheers and remarkable sounds, really, Richard. Because $3 billion raised by the banks. Some of the banks said they might actually leave London. They didn't leave London, they paid the tax. They paid even more than expected. And that money in this run up to the election will go to small businesses. Just many of the ways, as one evening here paper called it, the Robin Hood budget, taking to the rich and giving to the not-so-rich, Richard.

QUEST: Is there a feeling, though, because it is so difficult to separate and the politics from the economics at this moment, that we actually did get a view on how the U.K. is doing.

BOULDEN: Well, I put that to one of our friends, one of our economist friends, Ruth Lea, who happened to walk by our camera earlier. Because she is very concerned about the idea of how much the economy will grow here. Now, the chancellor, the finance minister said, it should grow between 1 and 1.5 percent this year, so, no double-dip recession, but maybe 3 to 3.5 percent next year. And this is what she had to say about that.


RUTH LEA, ECONOMIST, CENTER FOR POLICY STUDIES: I hope he's right. I certainly hope he's right. But I wouldn't guarantee it. And if he's wrong it means these public sets of borrowing figures would be even worse.


BOULDEN: Meaning, of course, that the government would have to the bond markets and raise even more debt, at the same time it is trying to cut the budget deficit here. And I should say, Richard, there was another national strike today with some government employees protesting out here. Because they are very upset that one of the cuts that will come will be to their pension, something that governments all over the world are facing. So, a lot of governments will be watching very carefully how the U.K. thinks it can cut the budget deficit, raise taxes without having too many people upset, and not kill off growth, just as we're coming out of recession, Richard.

QUEST: When we factor in how the U.K. stands with the rest of Europe, where we have on the one side, Greece, in perilous state. Tonight, we'll be reporting on this program about Portugal. And we've got, of course, Germany and France, being in better situations. I come back to this position, the electorate is going to have a very hard time with this one, working out what is truth and what's not.

BOULDEN: And we might have another budget in the few months' time. Because if you don't believe this one, and the electorate doesn't believe this one, and they put the conservatives into office come election, expected in early May, then they will come out with another budget where many people expect to have even harsher cuts, as you might think. As we try to see if they can cut the budget even more and bring that budget deficit down. Because the budget deficit here, Richard, is actually about the same as Greece.

QUEST: All right. Jim Boulden, many thanks indeed. Jim Boulden over at Westminster, with that.

And as we move on into our coverage we'll bring you up to date with not only what the budget means economically, we'll talk over a certain element of politics on this as well.

This is QUEST MEANS BUSINESS. In a moment a car maker, a steel maker, and one of the world's biggest mining companies. What they have in common, we'll tell you in a moment.


QUEST: Welcome back.

Now, we'll have more on the U.K. budget and its wider economic implications in just a moment. First, though, the news headlines. Fionnuala Sweeney is with us a the CNN News Desk.


QUEST: Three corporate corruption cases are playing out on three continents and some of the biggest names in the business are in the dock. In a court in Shanghai, the trial of four men accused of taking bribes and stealing state secrets, has come to an end. The four all worked for Rio Tinto, one of the world's largest mining companies. It is not clear when the verdict will be reached.

There is a separate bribery investigation in Britain. The target in the case is the French engineering company Alstom. Three executives were arrested and are being questioned by the Serious Fraud Office. The company says it has been under investigation for bribery by the Swiss authorities for the past three years.

And in the United States, charges against the German car maker Daimler; the charges are that they bribed, and they spanned many decades, way (ph) to be settled financially. Media reports citing unnamed sources say Daimler will pay fines and penalties amounting to $185 million.

Fred Pleitgen is monitoring this latest twist in a long-running saga for Daimler. And Fred joins me now, live from Berlin.

Well, we know-well facts are few and far between here. It is a U.S.- it's a U.S. action against a Germany company, for bribes, allegedly-or not, as the case may be-paid in the developing world. Is that just about the gist of it?

FREDRIK PLEITGEN, CNN INT'L. CORRESPONDENT: Well, that is pretty much the gist of it. And one of the things that a lot of people here in Germany, and certainly in other places, are asking is why this actually falls under U.S. jurisdiction? And the reason for that is, Richard, is that of course between the years 1998 and 2008, which is really the realm of investigation in this case, if you will; during those years Daimler was, of course, in a merger with Chrysler of America. Therefore, it was listed on the New York Stock Exchange, and therefore, it falls under U.S. jurisdiction.

And that is why right now the company is dealing both with the American Department of Justice, as well as with the Securities and Exchange Commission. And Daimler, so far, doesn't want to comment on the matter, however, it did say in its annual report of 2009, first of all, yes, improper payments were made, to officials in several companies. And, yes, it is in talks with the Department of Justice as well as the SEC to try and resolve the matter, Richard.

QUEST: Right, so let's just get down to brass tacks here, Fred. So, Daimler basically has admitted that there were improper activities that took place.

PLEITGEN: It certainly has, it has remained very vague on all of this, of course, all of this really only stems from its 2009 annual report. And all you'll find in there is that it says there has been an internal investigation, this internal investigation has found improper payments were made in Asia, Africa and Eastern Europe. And that they have shared all of this information with the feds in America.

Now, the Department of Justice in its litigation goes a lot further and into a lot more detail. What it says is that in the Daimler company, for years, there was a culture that both allowed and encouraged acts of bribery and corruption. It lists those 22 countries, among them, China, Russia, Egypt, as well as Iraq, where the company is also alleged to have breached the terms for the oil for food programs for bribing Saddam Hussein's officials. So, it certainly goes into a lot more detail on the whole matter. And it also alleges that some pretty high level people were involved, or at least knew about all of this, Richard.

QUEST: Right, well, Fred Pleitgen, many thanks indeed, bringing us up to date on the German side.

The law that Fred is talking about, or was talking about, is-well, if you are wondering why a German company is being charged by the U.S. for the way it did business everywhere from China to Nigeria, you really need to be familiar with the Foreign Corrupt Practices Act. This is a law, a U.S. law, which every company that chooses to be listed its shares on the U.S. stock exchange is subjected to. Also, often the subsidiaries of companies are subjected to it. It is extra territorial in the sense of the act doesn't have to take place in the United States.

I asked the executive director of Transparency International, if the U.S. law was simply too powerful?


CHANDRASHEKHAR KRISHNAN, EXEC. DIR., TRANSPARENCY INT'L.: Well, I would call it a very welcome piece of legislation. At which credits the U.S., was the first major industrial country to adopt a law, and this was way back in 1977.

QUEST: But if we look-



QUEST: If we look at the cases that the U.S. has brought, they do show a number of cases, where really the acts were overseas, the companies are non-U.S., but they are still brought within the United States.

KRISHNAN: Yes, and that is a testament to the long reach of U.S. law. But what the U.S. has been doing by example is forcing other jurisdictions, now, to crack down on foreign bribery also.

QUEST: But is it right that there should be this legislation that does have a long arm and is used by other countries, where they have no actual interest?

KRISHNAN: It is justified, because if you look at it from the point of view of U.S. companies, they don't have a level playing field, if they observe a no bribes policy, but other companies feel free to pay bribes abroad. Now, this would also find the U.K., where a country there is a bribery bill, before parliament, which we hope-fingers crossed-will be enacted before there is a general election. That bill also would give the U.K. power to enforce the law against the law against a foreign, if it is operating a part of its business in the U.K.

QUEST: Now, what about the old thing, one man's gift is another man's bribe? Local customs and practices, you've heard all these things before. Where is that dividing line, between what is acceptable and what is not.

KRISHNAN: Quite frankly, bribery is unacceptable.

QUEST: No, no, we accept that. But where is it acceptable to, if you like, accommodate local customs?

KRISHNAN: Look, my position is that it is not acceptable at all. And in virtually all countries in the world you actually have legislation which prohibits bribery. Now most countries in the world are a party to the U.N. convention against corruption. So, there should be no excuse that customs permit bribery, because if a company is operating according to the law it has no business to be paying bribes.

QUEST: All right. So, $10 million to get a deal, clearly-off the table; $50 to get your form dealt with in a timely fashion rather than waiting six months? Is that acceptable?

KRISHNAN: These payments which are called facilitation payments are ultimately bribes by another name.

QUEST: Yes, they are.

KRISHNAN: The problem is if a company makes those payments it makes itself much more vulnerable to payments of much larger bribes. So a much better approach is to resist making those payments, and to report them when they are requested.

I also want to make the point that when companies are paying bribes abroad, especially in countries where corruption is a problem, they are actually making the problem worse. And it is the case that bribery and corruption ultimately affects the poorest people in the poorest countries, in the worst possible way.


QUEST: We will talk more about that in the days ahead.

Debt-ridden and divided, Europe's problems mount a day before the EU leaders meet for a summit. We'll have the market reactions in a moment.


QUEST: Welcome back.

There are new doubts over the stability of Europe's most debt-ridden economies. Portugal was in the firing line on Wednesday. A credit rating agency cut its rating on bonds issue by the Portuguese government. Fitch said Portugal's plan for steadying its finance was based on assumptions that could prove over optimistic. Where have we heard that in recent weeks?

European leaders seem as far as ever-excuse me-as reaching agreement on what help to give Greece. A German politician said there was growing support for the idea that the IMF should be involved in any package of aid, at the same time a member of the European Central Bank's board said, leaning on IMF could seriously harm Euro Zone's stability.

You get the idea. Its uncertainty over Greece dragged the Euro into unwanted milestone a few hours ago, its weakest level against the Swiss franc since euro was created. So, there is a lot we really need to bring up to date here. Look at this. This is the euro against the dollar at the moment. It is a 10-month low against the U.S. currency, 1.3342, and it is all against of course heading for this EU summit, of heads of governments, which takes place on Thursday.

Now, the importance of course is every time any bit of the European Union is having these deficit worries, except-well, the Euro Zone particularly, this is what is getting bashed. The markets, however, well they were a little more resilient. The FTSE rose just a tad, barely changed but considering it was the U.K. budget I suppose that's not-that's not too bad. It was, of course, we had some financials that had gained in Frankfurt. And in Paris, the CAC currant, that was off just a fraction as well, relatively small movements, considering.

Deutsche Bank is up 4.6, announced cost-cutting savings, that was in Frankfurt. And the drug makers climbed, of course, after Shay (ph) gained on problems (ph) where it is U.S.

Now, this I think is also worth looking at. NYMEX, crude oil, $1.62- down $1.62, at $80.58. The data has shown that U.S. inventories are rising. Now, of course, you'll be aware that we're now coming into the summer months, in the northern hemispheric summer-if inventories are rising, the supply is increasing versus demand, classic economics, that you don't need me to point out. But that is exactly the sort of thing-come over here and let's have a word with Felicia Taylor, in New York.

Afternoon, to you, Felicia. We've seen this oil price. We've seen what is happening to the euro, vis-a-vis the dollar. And but of course, you had, interesting-I think they were interesting-I can't quite gauge them yet, economic numbers.

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: We did. That is right, but you know part of what is hitting the American markets today is also that credit worthiness of Portugal and whether or not that is going to spread to some of the other countries. But, and also it is helping out or U.S. dollar so that has been good news for us on that front.

But, indeed, we did have some numbers today. Sales of new homes fell to a record low in February. That is what is also hurting the market here. It was an unexpected decline of about 2 percent from January. That is more than 10 percent from a year ago. It puts a damper, obviously on recent optimism on, you know, whether or not this housing market is actually recovering. It is, but really slowly. We are not seeing the kind of growth that we'd like.

The market took the news pretty well, though. Stock barely moved when that report came out this morning. And it is really not putting that much pressure on the markets right now, because we are down, what, off a 2/5 of 1 percent and about half of a percent on both the Nasdaq and the S&P.

That could, though, you know this new home sales number could be affected by the weather we had in the U.S., in February. That kind of skewed the results, we had horrible snow storms, especially on the East Coast. And obviously that is going to change as we move into the spring months. So, the number will hopefully get better as we keep going.

QUEST: Fascinating, though, I'm sure, new homes sales were. And I can see you are as riveted about them as I am. I'm going to leave you there, Felicia. We are going to say good-bye to Felicia Taylor, not because her numbers weren't riveting. That's right give us a wave.

And I beg your pardon, I had hoped-you have enticed me to stay with you a second or two longer to hear-I know I'm just fickle like that this evening.

Felicia, if new home sales are down, and they are at record lows, I start to wonder what the wider economy is looking like. And what it will take to actually give that impetus, to actually get things moving faster?

TAYLOR: OK, this is a really interesting question, because we keep talking about the idea that things are getting better in the United States, albeit slowly. But the truth is if you take a look at some of the bigger Wall Street companies, they have a lot of cash on hand. That sounds great. But the question is why do they have a lot of cash on hand? Some of them have been buying back their stock. They have been selling their products in other countries. Certainly not the United States, because the Americans aren't buying. So they are selling their products in Brazil, China, India. Those are the big companies.

But when it comes to a real recovery in this economy, you have to take a look at small businesses. They aren't getting any better. And excuse me one of those other reasons that the bigger companies are doing well, is because they are laying off 1000s of people.

QUEST: Right.

TAYLOR: That is why their bottom line looks better. It is not because they are doing a lot of business in the United States, it is because they are cutting costs. So, the truth is, until we see growth in- in the employment numbers, we re' not going to have a recovery. Because Americans don't have jobs, they can't buy new homes, like we just talked about, and they can't even put food on their table. So, the question really is whether or not we're going to see growth in small businesses. That is going to lead to a recovery here the United States.

QUEST: Now that is worth talking about, more than new home sales. All right. Many thanks. We'll talk more about that. Felicia Taylor, many thanks for joining us.

When we come back in just a moment, I referred to it as the Gladstone Bag, it goes back to 1859. It was the box that the Chancellor of the Exchequer held today. You'd expect to find some sobering numbers within it. Some chancellors found something more like a tipple than a topple. More in a moment.


QUEST: I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN.

Our top story tonight, Britain's finance seem to be in better shape than we had first thought. On Wednesday, in a budget, the finance minister, the Chancellor of the Exchequer Alistair Darling said the government won't have to borrow quite so much as he previously feared. He squeezed more money than expected from bankers in the one-off tax on their bonuses; $3 billion worth, in fact. It all left room for a few pre- election sweetness. Earlier I spoke to Keith Wade, the chief economist at the asset management company, Schroders. I asked Keith, when he looked at the budget we saw today, what he made of it.


KEITH WADE, CHIEF ECONOMIST, SCHRODERS: Well, you are right, I mean, there were no, really, big surprises there. And the chancellor, really, doesn't have a lot to play with, so what he's done he's been quite clever. I mean, he's got slightly better borrowing numbers than he expected to get, so he has spent some of it and saved some of it.

But in terms of the macroeconomic outlook, it is not going to make a great deal of difference. And the chancellor, himself, did not really change his forecast for U.K. GDP this year, still expected to be between 1 and 1.5 percent. So, not a huge impact from the budget.

QUEST: The thing I noticed was that the chancellor's forecast for next year, at 3 to 3.5 percent is considerably higher than most private forecasts. Which are still between 2 and 2.5 percent. Whether it is the IMF, the OECD, or a consensus forecast. So if those numbers are wrong, the chancellor is in trouble next year.

WADE: Well, I would have to say we were surprised that he still stuck with those numbers. He is looking for nearly 3.5 percent GDP growth, next year. Which is right at the top end of anybody's forecast. I don't quite see how he is going to achieve that. The economy still has a lot of restricting to do. Household sector is still paying down debt. Global economy picking up a bit, but probably not strong enough to drive that kind of strong growth rate. So, you are absolutely right. I think we'll undershoot that, we'll probably come in nearer to 2 percent. That, of course, will mean that unemployment will not fall as much, perhaps, as the chancellor was expecting. Revenue will not be as strong. So it does mean, actually, that these borrowing numbers will probably be worse than he is anticipating in today's statement.

QUEST: Let's talk about where this puts the U.K., within the European Union, and other countries. And I suppose that the core question that tonight people are asking is, is the U.K. better or worse, than the other countries?

WADE: Well-

QUEST: Not including Greece.

WADE: Not including Greece. I mean, looking at the picture, the U.K. is probably a bit better than some of the worst countries. But it is worse than Germany or France, where budget deficit is running at around 6 or 7 percent of GDP. Our budget deficit, of course, is at 12 percent of GDP.

So we are worse than those two major economies. And, in some ways, we're actually worse than Italy, although our level of outstanding debt is not as high as Italy. Our budget deficit is -- is greater. And so we're deteriorating at a faster rate.

So, in many ways, we -- we're still amongst the bad boys of Europe, that we do need to show some real improvement. And I think the chancellor's measures are going to take us a step in that direction.

But as we've highlighted, growth is probably not going to be as strong. And there could be some revenue areas where we don't get as much as expected.

So I think that we've still got quite a lot of work to do within a European context.

QUEST: I've got my traffic lights here in the studio. If you take this budget and the U.K. economy, red, obviously stop; amber, well, unsure; green, full steam ahead.

Which -- which one would you like tonight?

What color do you want tonight?

WADE: I think we're probably still on amber, actually.

QUEST: Still on amber?

WADE: Yes.

QUEST: Many thanks...

WADE: We're not -- we're not full steam ahead yet.


QUEST: So there's the amber flash or not flashing. And that's the way the current situation is.

Now, David Blanchflower is professor of economics at Dartmouth College in the U.S., a former member of the Bank of England's monetary policy committee -- interest rate setting.

He joins me now.

David, many thanks.

Lovely to have you with us.


QUEST: And first...

BLANCHFLOWER: It's nice to be back.

QUEST: Look, David, you're -- I've read a lot of what you've said today and what you have written today. Your fundamental point is that now is not the time to be cutting, in any shape or form, fiscal stimulus packages. And yet the opposition Tories believe that's what needs to happen.

BLANCHFLOWER: All right. Well, the -- the -- we've got ourselves into a position, we're in the greatest financial crisis in 100 years. But fiscal and monetary policy stemmed that flow, stopped the economy going over the cliff and stopped the rapid decline.

So now we sit trundling along the bottom, hoping that growth is going to come. Very little sign that growth is coming from private sector. We're not seeing private sector job creation. We're not seeing private sector investment. We're seeing everything driven...

QUEST: Oh...

BLANCHFLOWER: -- by the public sector. So keep going. You have to keep going because history teaches us the biggest mistake you make is to cut too soon. And if you don't learn from the lessons of history, you repeat them -- 1937 all over again.

QUEST: Right. But...

BLANCHFLOWER: So the logic is generate growth, keep going and then do it.

QUEST: All right, but what about these optimistic growth forecast numbers of 3 to 3.5 percent, when, frankly, everybody and the dog next door believes the U.K. won't grow that fast?

BLANCHFLOWER: Well, they -- I have said and written things today that the growth forecasts don't seem terribly credible, especially -- not even so much this year, but the following year. But that's more of an argument to stimulate growth and less of an argument to cut. I mean the worry is that growth is less than that. Obviously, that's going to have an impact.

I think partly people have thought we have to pay things back very quickly. This is a once in a 100 years event. So maybe we just take a little longer to -- to, if you like, pay it back.

And the other thing is remember that the U.K. has been hit by a financial shock and we are in a situation rather differently from Italy and Germany and these other countries, because we have this huge financial sector. And that's why we've had to intervene to help in a financial shock.

QUEST: Right.

Do you...

BLANCHFLOWER: And you don't get over this huge shock quickly.

QUEST: Right. But -- but -- but if you're -- and -- and others are wrong and we don't deal -- or the U.K. doesn't deal with the -- with the debt sooner rather than later, two things happen.

Does the debt become unserviceable at a -- heading toward 8 or 9 percent?

And then, do we not end up with inflation?

BLANCHFLOWER: Well, I don't think it becomes unserviceable. And, in some sense we are -- we're in a position where interest rates are pretty low at the moment. Even countries like Italy that are low in notches down on the credit ratings are not -- are not that -- it's not costing them that much more money than -- than the U.K.

And the other thing is the U -- as Mervyn King's made clear, the U.K.'s debt is a longer-term debt. It doesn't roll over that fast.


BLANCHFLOWER: So that's the first thing. The second thing is I would love to have some inflation. I mean, in fact, it will -- down the road, the problem is to actually create any. If you look at the Bank of England's report, it says that with all the stimulus and with a really even rosier growth forecast than -- than Alistair Darling's, inflation never hits the target.

So supposing I take your -- your suggestion, Richard, that actually the growth forecasts are that -- aren't as strong as the -- as Darling suggested, inflation will be well below the target, heading toward deflation, not toward inflation...

QUEST: And there we'll have to...

BLANCHFLOWER: -- (INAUDIBLE) the stimulus going. If you were sitting on the MPP, that's what you'd do -- more stimulus.

QUEST: More stimulus.


QUEST: Well, now there -- now that's a cheerful thought to...

BLANCHFLOWER: More stimulus, not less.

QUEST: All right. Many thanks, David.

Lovely to see you, as always.

Please come back again.

BLANCHFLOWER: A lovely chat.

QUEST: More stimulus from David Blanchflower.

There we are.

Now, talking of stimulus, one man who used to -- pardon the phrase -- stimulate his budget, was Norman Lamont, Chancellor Norman Lamont. He'll tell us what he used to drink when he was doing his budget, in just a moment.


QUEST: One man who knows what it's like to deliver the budget -- it's Norman Lamont, who was Britain's finance minister from 1990 to '93. He was in the Conservative government of John Major.

Now, when we look at the budget, I asked him and put it to him that the aim of the budget this time around, with an election coming up, was to do no harm and maybe -- maybe, maybe, maybe a little good.


NORMAN LAMONT, U.K. FINANCE MINISTER, 1990-93: I think that's quite a good summary. I think the chancellor basically decided to do nothing and he had a few measures to help small businesses.

But I think the real conclusion of this budget is that the real budget will be after the election. That's when the cuts in public spending will come. There will be cuts in public spending whoever wins the election.

And all this argument about you mustn't endanger the recovery, that's just a cover for the fact that there is an election pending and they don't want to say anything unpleasant during an election.

QUEST: And, Professor Branchflower, who you'll be familiar with, is of the opinion that it is entirely wrong at this point to -- to talk about withdrawing stimulus, both the IMF says it believes. The chancellor said it today.

So to some extent, is the leader of the operation, is David Cameron on a bit of a loose wicket when he sort of has to -- he -- he puts forward the idea of withdrawal of stimulus at this moment?

LAMONT: No, I don't think so. I mean, opinion may be divided. Professor Blanchflower has one opinion. The European Commission has a different opinion. The CBI have a different opinion.

And I think when you look at the facts of our deficit, it is truly alarming. Our deficit is comparable, proportionately, to that of Greece. Greece is reducing its deficit much more quickly than we are, probably with the encouragement of the British government, as well, who can recognize how dangerous it is for Greece.

QUEST: If we accept the chancellor's numbers -- and I understand there's obviously a disagreement about the question of the -- the rate of growth -- he has the deficit down at 4 percent by 2014 and a structural deficit at under 2, at about 2 or 2.5 percent. So it shows that these numbers, that they are manageable.

LAMONT: Yes, but certain things could happen in the interval. You have to consider the risks. Two things could happen. One, interest rates will very probably go up. The cost of financing debt goes up. And, secondly, the rate of growth of the economy slows, so that it's more or less equal to the rate of interest. That's when you get in a very difficult situation.

QUEST: From the moment you walk out of Number Eleven Downing Street and you hold the box up, when you visit -- I mean are you convinced, at that point, that you've got it right and it's the right budget?

LAMONT: Well, I would doubt if anybody is -- except a fool -- would ever be totally convinced they've got it completely right. One, you have to be worried about the budget judgment, so to speak, that you make.

QUEST: Right.

LAMONT: Two, you have to be worried about whether public reaction will be right. And, you know, I often used to think to myself, as I read out the budget speech -- and you do have to read a budget speech, you can't make it. You have to read it, because everything has to be very precise, the figures have to be exact. And sometimes I would think, from the reaction of the House of Commons, which, of course, is not the same as the public, I would think, well, that didn't go down very well or they seemed to have misunderstood that or my goodness, this is very boring.

Are they really going to understand what I'm saying?

No. I think any person who has any self-awareness will be worried about how it's going to appear.

QUEST: And you had a -- I think your -- your -- your drink was a -- a scotch, if I'm not mistaken, during the -- during the budget?

LAMONT: Yes, a very weak one.

QUEST: Did you -- would you say you enjoyed budget day?

LAMONT: Yes, I would say I enjoyed budget day, though I wouldn't personally to have liked to have delivered as many budgets as Gordon Brown did. A lot of them I felt weren't very good budgets. But it must become a bit of a routine, a bit of a drudge by the end, I think.


QUEST: Chancellor Norman Lamont, now Lord Lamont. And the reason I was asking him about his drinking habits, a finance minister is the only M.P. who's allowed to consume alcohol in the House of Commons chamber. Let's look at this. This is some of the trivia and the oddities of budget day.

Tipple time -- booze is allowed by whoever is doing the budget. Now, today, Alistair Darling just drank still water. Gordon Brown used to like sparkling water.

However, if you look, for example, at others, most, like, for example, Norman Lamont, John Major, Jeffrey Howell (ph), they used to drink light scotch. However, Mr. Gladstone -- Mr. Gladstone used to have sherry with an egg in it. Absolutely. Four hours, 45 minutes was the longest budget speech and it was by him. And that box, by the way, 1859. It was made for Gladstone. No wonder he had to have a surrey in his egg after having a box like that.

Anyway, that's the budget box. Only two or three chancellors have had to resign. Hugh Dalton resigned because he gave away a couple of the budget secrets. As I was saying earlier in the program, he leaked that the tax was going up on beer and on racing. And the newspapers got it before he gave it to the prayer (ph), before he gave it to the house. He had to resign.

He did manage to come back again to fight another election and, indeed, returned to government.

So, finally, tonight's Profitable Moment.

These are the budget documents behind what we heard today. Mind- numbing in detail. In here, you will find evidence to support every argument for or against a budget proposal. The U.K. finance minister forecasts the U.K.'s growth next year higher than anyone else, and that includes the IMF and OECD.

On the other side, the numbers in here show that borrowing will be less than forecast. That tells us things are getting better.

Even so, buried in here deep down are numbers that reveal that U.K. borrowing will still be over $180 billion worth of bonds over the next 12 months. That's a lot of money whichever way you put it.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I hope it's profitable.

"MARKETPLACE AFRICA" with Robyn Curnow is up next.

I'll see you tomorrow.