Nigel Beard MP, chairman of MP's financial markets and services group

Question: What was your initial reaction to the Budget?

Nigel Beard: I think the important thing to remember is that the world is in recession. This is the first time there's been a concerted recession for a long time. Despite that the United Kingdom economy is on an even keel, still growing and out-performing Japan, the rest of Europe and the USA.

That's the basic economic condition that most people want whether they are the City, manufacturing or whatever.

Question: Were there any surprises for you?

Nigel Beard: Not really. I think most people were aware that the tax revenue has not been rolling in as anticipated. They also knew that trade hasn't been buoyant and earnings have been difficult for sectors like manufacturing. The drop in the equity prices means there aren't the tax revenues in abundance from the City.

All that meant that there had to be some bridging of the gap and the natural thing to do in a recession is to do that by borrowing. The fiscal position is such that borrowing is entirely reasonable and within the rules.

Question: What was the PLP's reaction to the chancellor?

Nigel Beard: Very good. He made the point that this is the first time for a very long time for any party that we've had seven years of unremitting growth without a recession. And we're the only country that's in that position because everyone else has had some quarters in recession.

I think the parliamentary party are pleased with the overall picture and the scope. They also liked the twin aims of maintaining economic strength and social justice.

Apart from the macro economic side it - the productivity gap and so on - there are the provisions for pensioners and the children's trust fund. They balance the straight economic purposes of the Budget.

Question: Is it now expected that the chancellor has to pull out a pleaser such as the trust funds on Budget Day?

Nigel Beard: Maintaining economic strength and social justice is the strategy, after all, and he is going to repeat it. He has been sticking fairly closely to it in each of the budgets and this one was no exception.

Question: How much of an impact do you think Iraq has had on the chancellor's calculations?

Nigel Beard: Financially, it's the £3 billion that's been put aside for the requirements of the military, security and international development issues. But all that is covered, plus the drop in tax revenue, is covered by the borrowing requirement.

Question: A lot of people were looking for a hint on the euro. Why wasn't it there?

Nigel Beard: Well there's been a lot of gossip about it and about the possibility of him making the announcement today. I think that was always preposterous.

To make that announcement very important announcement of strategic significance in the middle of a Budget, in the middle of a war with Iraq would have looked like he was trying to keep away from it.

But he did give one or two hints; firstly that the borrowing requirement was within the requirements of Maastricht and the growth and stability pact. And not only is for this year but it is likely to remain so for the next three or four years.

Secondly, he did mention he would report on the economic tests. It was a bit like Banquo's ghost; it was there but it wasn't a very substantial presence.

Question: How do you think the Square Mile will view the Budget?

Nigel Beard: The hope that the stamp duty being abolished on share deals was always a bit hopeful. Given this is a year when the tax revenues have been going down, it wasn't going to be a year when the chancellor was going to give away a major source of revenue.

If he had done it would have looked very odd against a rise in national insurance contributions coming in the same week.

But I think there will be some welcome to the examination of obstacles to a more open market to financial services in Europe. I think that's a very good signal for the City.

Question: What were the things that the City will take heart from?

Nigel Beard: The fact that the economy is on an even keel; that fiscal and monetary policy are working hand in hand. There's nothing to scare the markets in any of it. It certainly won't worsen their position on equities.

There may have been one or two interested in the euro but I think it would have been a vain wondering.

There will be interest in the David Miles review of changing to fixed mortgage rates but that's not going to happen tomorrow. He's going to have to spend 18 months on it at least.

Question: Was there a key theme?

Nigel Beard: His stress on productivity - a theme that he's been nibbling at for some time - is an abiding theme. I'm not sure how much the City is concerned with it but I think in terms of the general economy it's an important factor.

Question: Is that a central concern for the chancellor?

Nigel Beard: We do have this big gap with North America. It does seem to be closing with Europe although not that quickly and he is attributing it to the lack of innovation.

That's been partly due to the lack of start-up funds available to small firms which he addressed in his speech. The new R and D grant is going to be given a wider definition so that it doesn't just cover research at the beginning of a project but also development and prototypes. That's very significant.

Question: The all party wholesale financial markets and services parliamentary group is quite a new development. What was the idea behind it?

Nigel Beard: Politics in Westminster and the City are the two main arms of power and influence in the country. They do have mutual interests and a lot of interactions.

The financial services and markets act, as well as major pieces of subsidiary legislation coming from the FSA are things we will be pondering and the City will have a view on.

But there are many more issues than that to do with the way European markets and financial services are handled.

The group exists as a forum to exchange ideas and it's long overdue. I know we've got friendships 'across the divide' as it were but this is a formal arrangement where we can listen to experts. It's very positive.

It hasn't happened before partly because the City's markets haven't seen themselves as a single entity before now. I think probably the unified regulator has helped people to see it as a single industry.

The developments in Europe such as a single financial services market and the mergers of the stock exchanges have had an impact.

Question: Do you think there's been mutual suspicion in the past - the idea that politics and business shouldn't mix?

Nigel Beard: Going back into medieval history you had the City of London and Westminster drawn up separately. The king and his courtiers didn't want to be overborne by the wealth of the merchants. Much of that arms length attitude is manifest in today's ritual when the Queen and the Lord Mayor meet.

Other countries have separate political and economic centres - such as Washington and New York - so it's not unusual.

But it's been carried over to the 20th century in the slogans of democracy for the people and capitalism for the rich.

The deeper symbolism is that the superficiality is breaking down and people are seeing that these are sections of society that have got to work together for common solutions.

Question: Have incidents like Black Wednesday and the Enron scandal forced the City to change?

Nigel Beard: I think politics is changing too. There isn't the same emphasis on broad-brush ideology. There's recognition by people of all persuasions that what the country needs is what works. You get a better chance of making things work if the people that have got the different skills co-operate.

Question: Do the two sides also have an image problem with the public?

Nigel Beard: I'm not sure that's more than it's ever been. I don't think politicians have ever been any more popular than bankers have. I don't think it's anything new. People put these things down to the decades and protest movements but there have always been dissenters. It's not new that the banking and political fraternities have had to come together in emergencies. That's how the Rothschilds gained their influence across Europe.