................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 23.3.97
................................................................................ JOHN HUMPHRYS: Good afternoon. A Labour Government won't raise the rates of income tax and will stick to Tory spending plans in its first two years. I'll be asking the Shadow Chancellor Gordon Brown what that really means. The Liberal Democrats seem to be winning some of the arguments on things like voting reforms, but are they being marginalised in the real political world? And will this be the last General Election fought under the present laws? All that after News ready by CHRIS LOWE. NEWS HUMPHRYS: When is a political party NOT a party? During a General Election, that's when. Might this be the last election fought under the law that does not recognise national parties? We'll have a report on that. We'll also be talking to Menzies Campbell about how the Liberal Democrats want to change things.... and I'll be suggesting to him that they may be winning some arguments, but losing the battle. But first : of all the changes brought about by the modernisation of the Labour Party the most recent may be the most extraordinary: the promise by the Shadow Chancellor Gordon Brown that a Labour Government would not spend more than this government plans to spend over the next two years. Nor would there be any increase in the rates of income tax over the lifetime of a Labour parliament. Should we take all of that at face value ... or might it be, when the realities of government dawn, that Mr. Brown might have to act rather differently? Well, he is with me now. Good afternoon. GORDON BROWN MP: Good afternoon. HUMPHRYS: Now, apart from the Windfall Tax, about which we know and we'll talk about that a little later on. BROWN: I hope so. HUMPHRYS: Certainly will. You are committed to not raising income tax rates. Can you confirm that your commitment goes no further than that. BROWN: Well the commitment is for a Parliament for interest rates for the basic rate and the top rate. And in addition, what I'm saying is to have a fair system of income tax I want over time to introduce a 10p starting rate of tax. But there is no hidden agenda on the part of the Labour Party. There are no public spending commitments that we have that require these tax rises. But what I think is right that a Shadow Chancellor should do, is not go through every tax relief, every tax exemption ruling this in and ruling this out, but lay down the principles that govern your approach and the principles that govern my approach, in contrast to the Conservatives which I think, it's a form of trickle down on the part of the Conservatives, abolishing Capital Gains tax and Inheritance Tax. Our principles are first of all to encourage work and therefore reward work and give work the incentives that are necessary. Hence, to illustrate that my pledges on income tax rates. Secondly, to encourage savings and long term investment, opportunity for all through investment for the long term and certainly to be fair, hence we want to cut VAT on fuel to 5 per cent. Now these are the principles that govern the approach. The framework has been set down about public spending. I've given an illustration of the direction which I want to go. I don't think Ken Clarke as well as myself would be right to go through every tax relief or every tax allowance and make pledges on this or that. You can't in a television studio anyway write budgets for five years...for a full parliament...(interruption). What you've got to do and this is how we want to be judged. We should be judged on this: have we kept to our principles and our principles are a tax system that encourages work, encourages savings and long term investment and a tax system that is fair. HUMPHRYS: Right, but no-body watching this programme should be under any illusion, you are not saying we promise not to raise taxes in the next five years. You are simply saying we promise not to raise income taxes in the next five years. BROWN: I'd like of course tax to come down. But the important thing is that we are making a pledge for five years on the basic rate and the top rate of tax. We do show, not for opportunistic reasons, but as I say for reasons of principle, it's because I want to send this signal of the importance that I attach to work, encouraging work and rewarding work, that I've left the top rate of tax unchanged. I said that the basic rate of tax will not rise and... HUMPHRYS: Basically you mean twenty and twenty-four pence. BROWN: No, it's the twenty-three pence of rate actually. HUMPHRYS: Twenty-three pence. BROWN: It's now twenty-three pence. HUMPHRYS: Twenty pence so that stays where it is. BROWN: The twenty pence is not a basic rate of tax. I said the basic rate and the top rate of tax. What I would like to do is introduce a lower starting rate of tax at ten or fifteen pence in the pound and you see the reason for that is to encourage the unemployed back into work, to give the low paid a better incentive, to ensure that you have a break from these high marginal tax rates at the very bottom and that's where the difference of principle arises between us and the Conservative Party. You see their trickle down is abolish Capital Gains Tax and Inheritance Tax, use scarce resources to do that and then hope that the economy gets better as a result and that everybody prospers. Our way is opportunity for all. So we say let's get as quickly as possible to a lower starting rate of tax, it's actually a more progressive tax system, ten to forty than twenty to forty and then we help the low paid in particular and we help particularly those people who are finding it difficult to get back into work because for every extra pound they earn they lose about one pound or sometimes one pound fifty through the benefit system and the tax system working against them. HUMPHRYS: Right. BROWN: Now we want to make changes in that. Now that's what makes for a dynamic economy. It is opportunity for all, not the Conservative tax approach which is privilege for a few. HUMPHRYS: Right, but obviously none of that rules out the possibility that there may be tax increases in one direction or another, other than those specific pledges you've made on income tax rates. BROWN: Well I don't want... HUMPHRYS: I take the point you don't want to but the possibility remains? BROWN: I've got to put it to the country, what is it that a responsible Shadow Chancellor does and I think it is responsible to lay down the principles. I ask that people judge me on these principles and... HUMPHRYS: And it would be irresponsible then wouldn't it to say... BROWN: To set the direction. HUMPHRYS: Quite and it would be irresponsible then to say: there will be no tax rises because you cannot make that pledge. There may be tax rises but not income tax rises. BROWN: But what I'm also saying and I think I've been very careful in this and prudent in this, is saying that there are no public expenditure commitments on our part that will raise taxes. In fact, I've laid down as you rightly pointed out, very tough public spending rules for the first two years of the Parliament. In addition to that of course, I've laid down what I call the golden rule of public spending and borrowing which means that over time, that's the economic cycle, you want consumption to be funded by revenues and whatever borrowing is necessary must be within strict limits. So we've got a tough framework for public spending and public borrowing, it allows us therefore to make these commitments on income tax, it allows us to hope also that we can over time introduce what I think will be extremely good for the economy, this ten p starting rate of tax. And I ask you to compare that with the Conservatives proposal that they will abolish Capital Gains and Inheritance Tax and the biggest beneficiaries of that are only five thousand people in the economy. HUMPHRYS: Right but that as you've said is not a commitment, the ten pence rate, that is an aspiration. But... BROWN: It is an aspiration but I'm serious enough about it to show the advantages to the public of it. You see a lot of people think about Labour's tax policies that they are simply opportunist, they are not, they're based on pinciple. In 1992, when I took over from John Smith as Shadow Chancellor I said I would rebuild our approach to tax from first principles and that is why I made all the changes. I dropped the Shadow Budget and all that that implied. I said that tax must be based on clear principles of work, of savings, of fairness. And I then rebuilt our approach to taxation around that and when people ask me: has the Labour Party changed on this? I say definitely yes because we've gone back to what I think are Labour principles, building your system of taxation on opportunity for all whereas I would say the Conservative approach and I think it will be tested during this campaign, with their proposals on Capital Gains Tax and Inheritance Tax, is about privilege for a few. HUMPHRYS: And you use the word 'fairness' - you return to the word 'fairness' over and over again. Would you not accept in that context - in the context of fairness - that the earnings limit on National Insurance - employees' National Insurance payments is unfair because manifestly it favours the better off at the expense of the worst off. If you're earning twenty-three thousand pounds, or whatever it is, you pay two thousand odd pounds in National Insurance. If you're earning ten times that amount, you still pay only two thousand pounds. BROWN: Well, we- HUMPHRYS: Now, that isn't fair, is it? BROWN: Well, this approach to the National Insurance ceiling. We dropped that in 1992. It was announced at the time in the Shadow- HUMPHRYS: But, I thought this was a guiding principle of fairness - you said so, at the time? BROWN: The Shadow Budget dropped it but what Ido say abour fairness - let's look at what our principles of fairness and how they're applied. First of all, cutting VAT on fuel. HUMPHRYS: No, no, but let's look at National Insurance... BROWN: Well, come back-come back to that, in a second but let me just explain. Cutting VAT on fuel to five per cent. Now, that is regarded by the public, I think, as the most unfairest tax of all the twenty two tax rises under the Conservatives. And, we are pledged to reduce that from eight per cent to the lowest level possible - that's five per cent. Now, that will help pensioners most of all. Secondly, the Windfall Tax. You said you- HUMPHRYS: Yes, we wanted to discuss that - yes. BROWN: Well, that is a fairness measure because it is excess profits of a few being used to provide jobs - two hundred and fifty thousand jobs for the young unemployed. The ten p tax rate. Now, that, again. HUMPHRYS: Not a commitment, an aspiration and you mentioned that. BROWN: It's a very important aspiration. HUMPHRYS: But let's deal with - Alright, but it hasn't happened and we're dealing, at the moment, with things that you say- BROWN: Of course. HUMPHRYS: -are manifestly fair and unfair. Now, what I'm asking you to comment on is whether - although you dropped it - as you say, you dropped it after the last Budget, the last Shadow Budget but is-is the principle guiding National Insurance fair or unfair, in your terms? BROWN: Of course, any decision I make has got to be fair but, of course, the National Insurance system itself has changed over the years. It used to be heavily earnings related and, therefore, it was right to look for more at the top. That has changed. It is no longer heavily earnings related. HUMPHRYS: Well- BROWN: And, we dropped that policy in 1992. The Shadow Budget was dropped and, I think, I remember doing interviews with you, at the time - when you asked me about why we dropped the Shadow Budget and I said: look, you've got to go back to first principles on taxation. And, by going back to first principles and taxation, I come to the conclusion that the fairest way of dealing with taxation on work is to try and get, as quickly as possible, to a lower starting rate of tax to encourage all. And, then, you've got a more progressive tax system - ten to forty. HUMPHRYS: But, that's exactly the point isn't it? You want a more progressive tax system and yet the more you earn - under this present system, as far as National Insurance is concerned the better off you are. Now, how is that progressive and by your own claims time and time and time again, the rich have got richer over these past many years, the poor have relatively got poorer. And, yet, you're prepared to reward the richer by allowing them to get away with not paying National Insurance. Now, that wasn't fair five years ago. BROWN: But, John, you've got it all wrong because what is the reason, what is the reason why the rich have got richer and the poor have got poorer? What is the biggest inequality and injustice in our society that's causing that? It is the lack of work and the lack of skills for work. HUMPHRYS: That is one of the reasons. The other reason is the tax regime. BROWN: No, no. That is the biggest. That has caused the biggest rise in inequality in our country. It has been the lack of work and the lack of skills for work. It has been unskilled workers in particular being denied higher earnings as a result of not having skills but it's also people being denied work. Now, every decision I make has got to be a balance between what I do to encourage work, what I do to encourage savings and long-term investment and what I do to make the tax system fair. HUMPHRYS: Precisely and it's that last context that I'm trying to get you to talk about: National Insurance. BROWN: This is exactly the point I'm making. I want to encourage jobs. I want to encourage incentives for jobs, I want particularly to get the long-term unemployed back to work and, therefore, I want a tax system that must balance the need to create jobs with the need for fairness. And, I tell you, the National Insurance system of payments is rather different from what it was twenty or ten years ago. HUMPHRYS: So, have you ruled it out, then? BROWN: I've ruled it out and I said so in 1992. HUMPHRYS: Forever? BROWN: Well, we said in 1992 we weren't returning to this and that's something I've said over five years. There can be no doubt about that. HUMPHRYS: So, absolutely no abandonment of the upper earnings limit under a Labour Government - that is a pledge? BROWN: Well, that's what was said in 1992, John. HUMPHRYS: And, nothing that has happened since then, not withstanding the commitments to fairness have persuaded you to change your mind? BROWN: Well, if anything the point I'm making is our emphasis must be on the creation of jobs. It must be on doing that. HUMPHRYS: Right. BROWN: And, encouraging work, encouraging people to work harder, rewarding the work ethic. That is the biggest inequality in Britain today. HUMPHRYS: OK, so we- BROWN: The lack of work and the lack of skills for work. HUMPHRYS: So, we can add to the commitments on Income Tax, a commitment on National Insurance - absolutely no abandoning that fact. BROWN: Well, that was made in 1992. HUMPHRYS: Let's look, then, at the other tax that you're anxious to talk about - the Windfall Tax. Anxious to talk about it, but we still don't know and this is absolutely fundamental, isn't it? We still don't know which companies are going to have to pay that tax. Now, you had a press conference last week, you wouldn't name the companies and yet your assistants, the minute the press conference was over rushed off and started talking to reporters from this organisation among others, telling them which companies were going to be included in their tax. BROWN: I don't think that's strictly accurate. HUMPHRYS: Why? BROWN: I mean, I think this is- HUMPHRYS: I'm quite happy to give you names, if you wish. BROWN: What the names of reporters or the names of individuals? HUMPHRYS: Both, both, both. BROWN: Now, John, let's get this back to a certain proportion. HUMPHRYS: Well- BROWN: When you're talking about a Windfall Tax in the utilities the first thing is its purpose. It's not there for its own sake, it's about creating jobs. HUMPHRYS: I didn't suggest anything of the sort. I merely wanted to know who is going to have to pay it because that's fundamental? BROWN: Let's be clear about the purpose, first of all. HUMPHRYS: Secondly, who's going to pay? BROWN: What I've got to do as a-as a Shadow Chancellor and, eventually, I hope, as a Chancellor is draw up the tax law that will govern this approach. The Conservatives had a Windfall Tax in the banks, they never announced the companies beforehand. What I say we've got to do is announce the category of company that is eligible for this tax and that is the right thing to do. And, I said on Wednesday and it was absolutely clear, then, that the companies that are affected who would be considered for this tax are those companies who've been privatised and who are licenced and regulated by Statute. And, I think, that's pretty clear. You're talking about privatised utilities that are now regulated by Statute. HUMPHRYS: Right but you missed something out there, didn't you? BROWN: Can I just finish this because it's quite important. These are the companies that would be eligible but, of course, if they hadn't made excess profits they would not be liable. So, the next stage, of course, is inside the Treasury, in Government, looking at excess profits and then making a judgment as to which companies are liable for this tax. They may be eligible but not liable and which companies are liable will be decided inside the Treasury and, then, of course, I'll announce it in the normal way- HUMPHRYS: Right. BROWN: - in a Budget. But, what I will announce in that Budget is the category of company that is affected and the rules that will be followed then. HUMPHRYS: So let's just pursue the eligibility bit for a moment then, because yes, you did indeed say those companies that were eligible, utilities privatised since 1979, that were regulated and licenced by statute. What you used to say were - you added something on - you said those that also enjoyed some sort of monopoly status. BROWN: No, I didn't .. no, no, John.. HUMPHRYS: You certainly did in the past, you said that to me in the past. BROWN: Well, let's just be clear about this. What I said was companies that are licensed and regulated by statute, and then I said, if they are liable to pay this they will have to have made excess profits. It's the excess profits that we're going to use to finance our jobs programme, and I think many of the utilities would like now, that to happen and to get this sorted out. HUMPHRYS: So monopoly doesn't come into it? BROWN: And the excess profits of course, will have been made either because of lax regulation or because of the monopoly position of these companies, or because of the under-valuation of the sale price, so it's pretty clear that excess profits arise from a particular reason. It could be lax regulation, because the Trade and Industry Select Committee which I was referring to this week, an all party committee, five Conservative MPs on it, published a report saying that yes indeed, the regulatory regime has been lax. At the same time there have been many reports talking about the under-valuation of the sale prices of these utilities, right up to, and including the most recent privatisations, and of course monopoly position is something that has got to be taken into consideration as well. So all of these three things have got to be taken into consideration, and therefore I'm not changing my position at all. It's utterly consistent with what I said last year and the year before. And just remember I have proposed this windfall levy for five years. Since 1992 I've said the purpose, I've said it's one-off, and I've said it will be done fairly and within the law, and I even went to the stage of publishing my legal opinion on this matter, so that everbody could see that it was strictly lawful, and it would go ahead in a fair way. HUMPHRYS: So manifestly then companies like BT who made very large amounts of money indeed since they were privatised, British Airports authorities manifestly made very large profits indeed since they were privatised, in that case some would say as a result of monopolies, of a monopolies situation, in the case of BT not as a result of a monopoly situation, but it was under-priced and so on and so on - both of those companies would come into that category, would come into the liability category. Now I know you're going to tell you won't name those companies. BROWN:: You see, you're at it again. What you want me to... HUMPHRYS: But I don't know why you're so coy about this. BROWN: What you want me to do is to name individual companies. Now, a Chancellor when he's announcing a budget does not say: Look this is - well, I've got to be fair and accurate in the law here, and be non-disciminatory, and I think people will understand it when I explain that, that a Chancellor when he's announcing a budget does not say, "I have got a tax to deal with X company or Y company. What he must say and rightly so is he's dealing with a category of companies. HUMPHRYS: Well, that's what I'm asking you. BROWN: And the category of companies are privatised utilities who are regulated and licensed by statute, but of course even if that were the case they will have had to have made excess profits. HUMPHRYS: Right, so you won't be naming them, not even in what we understand you're going to be producing - this manifesto, your separate manifesto for business. There'll be no more information in that manifesto for business than you have given me this morning? BROWN: Not on the Windfall Tax because I think I've done what actually is far more than the Conservatives did when they introduced a Windfall Tax in the banks, where they never even told the banks until after their legislation was published. HUMPRHYS: But there will be more information on some other areas? BROWN: Yes indeed. This business manifesto is a very important thing for the Labour Party. It will be as important to business as the General Election Manifesto as a whole will be to the electorate, because what it will set down is the principles that guide our approach and will reflect two years of very intense discussion with business about the way ahead. It will talk about the need for stability, the need for higher investment with some measures to achieve that, the importance we attach to education and the reform of the Welfare State, a constructive engagement with Europe. And I will be saying in that manifesto as will Tony Blair, that during the UK presidency of the European Community, the European Union in 1998 if we're returned to government that we will have a working party with business and government to look at all the issues on the economy affecting the presidency, completing the Single Market, labour market flexibility, the creation of jobs in Europe - we're going to have a Minister for Employment and labour market flexibility to deal with relationships with Europe, and we will want a working party of business and government to deal with these issues. And I have talked to Adair Turner the Director-General of the CBI about these matters... HUMPHRYS: And the Institute of Directors? BROWN: We will be talking to the Institute of Directors, and indeed Barbara Roche who speaks for small business for the Labour Party has been in touch with them about a number of issues as well. HUMPHRYS: And have they endorsed it, both the CBI and the ...? BROWN: What Adair Turner has rightly said is that he is happy on behalf of the CBI to say that they will join this working party, because what we're trying to do is to lead in Europe about reform of competition policy and energy, and telecommunications. Labour is the party of competition, trying to get more competition into the European market, whether there our vested interests, whether a restrictive practice, we will break them down during our presidency wherever possible, and equally on labour market flexibility, adaptability and on job creation which is absolutely vital, where I believe we have more ideas to offer Europe than ever before about how we can both create jobs and make them more adaptable and flexible, we will be working with the CBI. So here we have, with Adair Turner, an agreement that the CBI will be represented on this working party, and I think this is a very important development, because it shows that business and government could work together both in Britian and Europe to achieve common aims. And we're getting away from this old idea that public has got to say one thing, private's got to say another, and there's never any proper relationship between them. HUMPHRYS: Right, can - I'll move on to the question of public finance, the state of the public finances. Tony Blair has said that there is a huge black hole in the nation's finances. Now what do you mean by that. Do you mean that we're borrowing too much this year when you talk about the huge black hole, or are you talking about the level of the nation's debt that has been built up as a result of borrowing over the past X number of years? BROWN: Well twenty six billion is itself a black hole isn't it. HUMPHRYS: That's the current borrowing. BROWN: We will finish this year with a twenty six billion deficit. Next year it will be nineteen billions, now that is very high indeed. The total of national debt has doubled since John Major became Prime Minister to more than four hundred billion pounds. And therefore it is quite wrong for the Government to say they are leaving the Public Finances in a good state. They are leaving us with difficulties and what I said only a few days ago is that we will not make the mistakes of 1964 or 1974 when Labour Governments came in and for a variety of reasons it did not acknowledge the problems that they were facing and ended up probably spending too much in the first two years and having to cut back for the next three years. That's why I've set these tough public spending rules, I know the problems we're going to inherit and I know we are going to have to act within these spending limits in Government. HUMPHRYS: You will have to act within those spending limits but will you set out, as a priority to tackle that..to fill in that big black hole in your first budget. BROWN: What I've said is that we will publish an audit of where the Conservatives have left us. I think it's only right... HUMPHRYS: That's not going to solve it is it. Spotting that the hole is there isn't the same as getting the spade and filling it in is it? BROWN: John, what you've got to look at and I think this is very important, is how has this deficit arisen.. HUMPHRYS: Right now because we don't have limitless time I'm much more concerned with how you're going to fill it, what I'm saying is you've said there is that big hole there, what I'm asking you now is how you're going to fill it in. BROWN: The twenty-six billion is big indeed and the reason that we've made these tough decisions about public spending is because we recognise we've got to get the deficit down. Now we have not made these extraordinary spending announcements that the Conservatives have made over the last few weeks, we have not committed ourselves to a Royal Yacht at sixty million pounds, to a Cadet Force of a billion pounds, to a new share scheme at forty million pounds to cutting this and that. HUMPHRYS: I'm asking what you are going to be doing. BROWN: So we are not making reckless spending commitments. What we are doing is acting within the spending announcements we've made and I have not only told my colleagues in the Shadow Cabinet they've
got to keep within that for one year, I have said we'll have a fundamental review of spending to influence year two and that will start immediately. In other words, the usual spending rounds are cancelled for the first year, so that we can have this fundamental review. And I think it's right, after eighteen years, coming into power we have a fundamental examination of each area of public spending. HUMPHRYS: Which is fine if what you are saying is - and as a result of those reviews we're going to chop chunks out of the Budget so that we can fill in that big black hole. BROWN: Well what we want to do, of course, and that's why we have this big Welfare to Work Programme is to cut the spending on Social Security. HUMPHRYS: Yes but as you know that takes time, that takes time. If you're telling me that this is an immediate problem, you've said - I've written down what you've said - "we're not going to make the same mistakes we've made in the past you said. It's got to be dealt with now". I'm asking you how you're going to deal with it. You tell me you're not going to spend sixty million on a Royal Yatch well fine, but that isn't going to fill in that hole is it. BROWN: But John, because we recognise the problem, I've set these tough limits. The previous Labour Governments allowed spending to rise in the first two years... HUMPHRYS: But the same limits, the same limits as the Government has at the moment and that hole is going to stay there. BROWN: And with a Welfare to Work Programme to get the deficit down. HUMPHRYS: Which will take many years to develop. BROWN: And with choices having to be made in existing spending programmes to re-direct resources like the Assisted Places Schemes. HUMPHRYS: In existing programmes. BROWN: Yes. Like the Assisted Places scheme in the councils. HUMPHRYS: But you're going to spend that money on something else, reducing the class sizes for five to seven year olds. BROWN: Like the shifts in Health Service expenditure these are very important, like the bold decision we made to replace Student Grants by Student Loans. Now all these things are big decisions that we made to use resources better. HUMPHRYS: But they're not going to fill in that hole. BROWN: We are reducing the deficit by tackling unemployment and high Social Security bills. We are also helping the reduction of the deficit by not making these extraordinary spending commitments the Tories have made. In other words, if the Tories were returned then their spending bills are already higher because of all the commitments.... HUMPHRYS: They might very well make that hole bigger, I wouldn't want to agure with you about that... BROWN: And we're going to bring down the deficit by these measures. One, sticking to our spending commitments.. HUMPHRYS: Which is the Tories' spending commitment. BROWN: Two, our Welfare to Work Programme to get... HUMPHRYS: Which will take years to get going. BROWN: John, that is ridiculous. You can move quickly to get unemployment down in this country by the measures we're talking about. HUMPHRYS: In other words, you will live in the immediate future, even though you say it is urgent, has to be dealt with now, you will live with the same black hole that the Tories are living with. BROWN: But John, we have got a strategy to get the deficit down. The strategy is first of all to stick to these tough spending limits, secondly, not to make extra commitments and thirdly, and thirdly, to introduce the Welfare to Work Programme as quickly as possible and that's why the Windfall Tax will be introduced in our first budget. HUMPHRYS: Putting aside the Windfall Tax, which we had David Blunkett on this programme telling us it isn't going to make a very large deal of difference in the amount the Government is going to have to spend, even if it works reasonably well and ... BROWN: This is where political debates get out of hand John because three billion pounds is not an insignificant sum of money. HUMPHRYS: I didn't suggest it was but three billion pounds assumes that all of those kids are back in work just like that and the reality is it's not going to happen and you know that. BROWN: For half this interview you've been wanting me to announce that I'm going to do more and now you say, when I say I'm going to do more, like three million unemployment, you say it doesn't add up to anything. It is very important and it will get unemployment down and I am absolutely determined that two hundred and fifty thousand young people get the chance of moving from Welfare to Work and in doing so we help everybody by reducing Social Security. HUMPHRYS: But if we look at one of the things you're going to have to spend a great deal of money on, every Government does and that is the National Health Service. Now you say there is a hundred million pounds crisis there, you'll save some money a hundred million pounds or whatever on bureaucracy or so you say, but you're actually telling me now that you are not looking at ways where you can put more money into the NHS for instance, you're looking at ways of cutting spending. So the NHS is going to "continue to suffer", I put the words in quotes because that's the sort of language you have used over the years, you've said the NHS, every time the NHS budget has been discussed you've said it has been starved of funds by this Government. Now you're sitting here this morning telling me we're cutting spending. That means the NHS is going to suffer. BROWN: John, this is a ridiculous proposition. We have spent the last... HUMPHRYS: What is? What's ridiculous? BROWN: It is a ridiculous proposition that we're cutting into the NHS - that is quite wrong. HUMPHRYS: You're not going to give it more money and it is already starved of funds. BROWN: We have said two things. One is that we will match the rise in inflation every year and secondly, we will transfer resources from administration to patient care. So that the Health Care services, the real services get more resources. And, you start with a hundred- HUMPHRYS: A hundred million. BROWN: You start with that. John, if I said to you- HUMPHRYS: That is less than one third of one per cent of the Budget BROWN: John, if I said to you.. HUMPHRYS: NHS Budget. BROWN: John, if I said to you in 1989, we spent eight per cent of the Health Service Budget on administration and now it's rising to thirteen per cent. HUMPHRYS: But, by your own figures you're telling me you're going to save a hundred million. BROWN: Well, let me finish, John. The difference is actually, one point five billion pounds. We have fifty thousand less nurses, twenty thousand more managers. Now, I'm telling you that the switch of resources back to patient care by scrapping the Tory internal market, by making the reforms and trusts and elsewhere that are necessary will release resources back to patient care. HUMPHRYS: One point five billion. BROWN: Over time, over time. HUMPHRYS: Over how long? BROWN: Over time we will reduce the share of administration from that thirteen...twelve to thirteen per cent, back below ten per cent and we will get the money back into patient care. HUMPHRYS: So one point five billion over what period of time? BROWN: We are pledged to make these changes and I think we can do that - over time. HUMPHRYS: How long? BROWN: I'm not going to set a timetable for it. HUMPHRYS: But you see what value of that is it. BROWN: But over time we will do it. We've said we will start with a hundred million and that's a very important commitment. George Robertson, my colleague the Scottish Under Secretary, has already announced he's scrapping Health Service Trusts and saving money from scrapping that additional tier of bureaucracy in the Health Service. He's going to merge a number of them and is going to save money that way - he says thirty million pounds in Scotland alone. Now, these are the sort of changes we can make to get money back to where it should be and that is to nurses and to doctors and to patient care and therefore, we cut the waiting list in doing so. And we end, I think, what is very clear about the Health Service a demoralisation amongst the staff. So, we'll make the difference. HUMPHRYS: Gordon Brown, thank you very much, indeed.