Norma Waterson and Eliza Carthy on their first mother-and-daughter album

Norma Waterson and Eliza Carthy are part of British folk music royalty, and as they release their first album as a mother-and-daughter duo, they talk to Jude Rogers

It's a Saturday morning in Robin Hood's Bay in North Yorkshire, and the sun shines through a window on to Norma Waterson's silver hair. Today, the titan of English folk music is in granny mode, in a reclining chair, a blanket over her knees. She smiles sleepily as her daughter, Eliza Carthy – five months pregnant – swoops in with some tea, while Carthy's first child, Florence, scribbles on her little knees with a biro.

"Being in a family and doing music, there is no way for you to have an ego," Waterson begins. "Everybody knows you. They know you too well." Carthy jumps in: "She" – she points at her mother – "wiped my arse. It's all, 'Don't come the big shot with me, missy, I used to smack your bum.'" They both burst out laughing, the sound filling the red-walled living room of the family home dotted with paintings and photos. "We hardly ever argue – only when she's forgotten to put sugar in my tea," Waterson says. "But we spend an awful lot of time laughing."

Norma Waterson and Eliza Carthy are the twin pillars of modern English folk music – or traditional music, as Waterson prefers to call it, recognising the presence of blues, jazz and other genres in the family repertoire. They have been performing together since they formed Waterson: Carthy in 1994, with Norma's husband and Carthy's father Martin – who famously inspired Bob Dylan and Paul Simon to delve into folk music in the early 1960s. But this month they release their first mother-and-daughter album, Gift.

"There's a very strong female element to the Watersons," says Carthy. "Mam made an album with her sister a long time ago."

"It was when I was pregnant with you, Eliza, in '75", says Waterson.

"We wanted to do something along those lines again," continues Carthy. "We've always sung together. We just love to get that sound between the two of us going."

The project has been on the cards for five years, Carthy explains, although her busy schedule has kept it on the back-burner. "But it was getting to the stage that mam was nagging me and going, 'I'm not long for this world,'" Carthy says. "I am not long for this world," Waterson interjects, her amusement touched with a little melancholy.

Gift is about the importance of female musicians in the folk canon, and when she talks about this, Waterson is loud and lively. Born in Hull in 1939, she sang throughout her childhood with her late sister Lal, and then in the family group the Watersons, with Lal, their brother Mike and cousin John Harrison. When the family upped sticks to Robin Hood's Bay in the 1960s, Norma and Lal became interested in folk music's female traditions. "Women have always been important in folk music." says Carthy. "That idea that the men go out to work, the women stay home and tell the stories."

"In indigenous places, a lot of singing happens between two or three women," adds Waterson. "For example, with the Inuits, the women sing into each others mouths. Me and my sister used to do that!" For resonance – it makes the top of your head vibrate, Carthy explains.

The sisters also became good friends with Kate and Anna McGarrigle, and Gift is dedicated to Kate, who died earlier this year. McGarrigle's death has affected Waterson profoundly. "When you lose a member of your family who is your singing partner, as well as your best friend and sister …" She shakes her head. "It's irreplaceable."

Spend an hour with this mother and daughter, and many people's prejudices about folk music would be destroyed instantly. In their hands, it is not odd, or insular or twee; it is outward-looking, passionate and earthy. Carthy's first memories of her parents' music, for instance, revolves around the huge parties they used to have, during which she would sneak downstairs and hide under a table to listen to them – an experience that Waterson had also had as a child. In 1968, Norma broke up the Watersons to become a DJ in the West Indies, not a career move you would usually associate with the arran-sweater brigade. Both mother and daughter also talk passionately about the pop music they like, which is why their new album features a cover of Amen Corner's 1968 hit, (If Paradise Is) Half As Nice, mixed together with the jazz standard Ukulele Lady. They also fondly remember Waterson's brush with the mainstream in 1996, when she just lost out to Pulp's Different Class for the Mercury music prize. "I wanted to adopt Jarvis," Waterson beams. "And he wanted me to adopt him too."

When they talk about the purists that sniff at the most recent folk revival, they are also unforgiving. Waterson presses a button on the side of her reclining chair as she talks about it, and her legs lower to a sitting position, as if she is ready to pounce.

"We thought – my generation of musicians – that we'd all get old and grey and there'd be nobody left. And then all this new generation of young musicians came up, and we all said, 'Thank God.' So if people say traditional music has got to be like that, or like that, then you're going to freeze it. You may as well put something in a museum or bury it in the ground in a time capsule and dig it up so many years later to see what it was like then. You can't do that with tradition. You have to hope each generation brings their own thing to it, so it keeps going forever."

Carthy agrees. "Everything's in a cycle, isn't it? Traditional music travelled over to America and then it came back again in the blues, and in rock'n'roll, and in jazz, in all that. I like to think everyone's adding to everyone's tradition." She softens a little. "We are all connected at the end of the day, after all. I know that sounds very touchy-feely, but it's true."

They also hate the idea of folk music looking back to a better England. "People think folk singers are nostalgic, harking back to some brighter past when kids could play upstream – and then get sent down the mines." Carthy pauses, raising an eyebrow towards her mother. "Mind you, I bet it was a lot quieter when kids were down the mines."

Waterson raises one back. "And then there was extra money."

There have proved to be advantages to keeping music in the family. Gift was recorded and engineered by Lal Waterson's son, Oliver Knight, who has a comfy home studio on the next road to his aunt. "So Mam could spend most of album recording in bed," Carthy smiles. But she also acknowledges that working with people so close to her has sometime caused problems when she works with people who aren't so close. "I'm weird with my bands. I'm always crushed when someone leaves." She looks rueful for a moment. "I know why, but I just don't get it. I'm just used to carrying on."

Gift is full of songs that mother and daughter have sung together for years – this was always this intention when they started making the album, they explain – but there are also a few numbers that Waterson hasn't sung since she was a teenager. That was a conscious choice, and you sense she wants to acknowledge life's full circle for other, deeper reasons. One of those songs is Bunch of Thyme, about a man taking a maiden's "bunch of thyme" away, which the young Norma thought really was about a bundle of herbs. "When Mam was young and innocent," Carthy says, as she looks at her. "When was that exactly?" Then there is The Boston Burglar, about a young man taken to jail, and Psalm of Life, which the women have turned into an exquisite Victorian parlour sing-along.

That song that is the album's real heart, Waterson says. "One lyric in it seemed to sum up everything we wanted to do." She addresses it to her daughter and her granddaughter, slowly and beautifully. "'Let's be up and doing with a heart for any fate.' It's brilliant that. Come on! It's become bit of family anthem. Let's be up and doing, come on then." And with that, she dunks another biscuit in her tea, and their laugh fills the room again.

Gift is released on Topic records on Monday. It is reviewed on page 12

Here Alexis Petridis picks five great records from the Waterson/Carthy dynasty:

The Watersons Frost and Fire (1965)

The astonishing documentary Travelling for a Living may be the best introduction to the world of the early Watersons, setting their voices against an unflinchingly bleak depiction of decidedly non-swinging 60s Yorkshire, but this collection of "English ritual and ceremonial song" shares its rough charm and austere power.

Lal & Mike Waterson Bright Phoebus (1972)

Bright Phoebus introduced Lal Waterson's amazing facility for songwriting – at turns harrowing, warm and witty, always utterly unlike anyone else. A commercial disaster on release, it remains one of the most unique and remarkable albums to emerge from the British folk revival.

Norma Waterson Norma Waterson (1996)

Norma Waterson is blessed with a voice that's parochial in the best sense of the word: it sounds like it's hewn out of Yorkshire stone. Who knew it would be as infinitely adaptable an instrument as it proved on her debut solo album, which boldly ventured into the realms of blues, jazz and Billy Bragg? The end result deservedly garnered a Mercury prize nomination.

Waterson:Carthy Common Tongue (1997)

Perhaps the pick of the albums Norma Waterson and Martin Carthy made with daughter Eliza – although the resolutely downcast Christmas album Holy Heathens and The Old Green Man runs it close. There's nothing academic about their approach to the forgotten songs they had unearthed and restored: instead they come alive, as evidenced by the beautiful Claudy Banks, a song previously released on a wax cylinder in 1908.

Eliza Carthy Anglicana (2002)

All of Eliza Carthy's irk-the-purists efforts to update the English folk tradition were bold, but not all have aged gracefully: the drum'n'bass rhythms of Red Rice have dated worse than the trad arr songs. Her masterpiece may be Anglicana: less bolshy and dramatic in its attempts to drag the folk tradition into the 21st-century, relying instead on pared-down arrangements and Carthy's voice.
Jude Rogers

The GuardianTramp

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