................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 19.11.95
................................................................................ JOHN HUMPHRYS: Good afternoon. The Labour Party has at last begun to unveil some of its policies on tax - and it seems to be the worst-off who are meant to benefit the most. I'll be asking the Shadow Chancellor whether it really will be the poor who get the most help. That's after the news read by MOIRA STUART. NEWS HUMPHRYS: But first - Labour and tax. Many questions have been asked over the last couple of years - few have been answered. Now the Shadow Chancellor, Gordon Brown, has begun to remove some of the veils and what's been revealed is that a Labour government would set out to help those at the bottom of the pile first... perhaps cut the lowest rate of tax from twenty to TEN pence in the pound. I'll be asking Mr Brown about all that after this report from Simon Buckby on the revelations so far. ***** HUMPHRYS: Gordon Brown, do you want to cut the starting rate of tax from twenty pence in the pound to ten pence in the pound? GORDON BROWN MP: Yes, I would like to. That's a long term objective of the Labour Party, and I'm setting down the principles tomorrow of our taxation system. I think it's right for people to know where exactly they will stand with Labour and what principles we will pursue, the direction we will go in government. And, we have made the hard choices, and so the principles on which we will develop the tax system are these: first of all, it must be fair and progressive, secondly - and I think this is very important - it must encourage employment and reward work and effort; thirdly, it must be open and transparent and honest in a way the tax system has not been under the Conservatives; and fourthly it must encourage the long term. These are long term principles, and of course I'm not making commitments at this stage for any particular year. But, I want people to know in contrast to the Conservatives this long term direction for taxation is to abolish Capital Gains Tax and Inheritance Tax at the cost to a very few. Mr Major's objective he said when affordable. My objective when affordable is quite different: is to reduce the starting rate of tax to help people get into work, a fair way of doing so, and something that I believe is what will be welcomed by the British people HUMPHRYS: So you are making the assumption that there are some people - perhaps many people - who don't work at the moment because it doesn't pay them to work? BROWN: What I said yesterday was: you've got to look at the tax and benefit system, the introduction of a Minimum Wage, and our employment creation measures as a whole. And, taken together the employment creation proposals that we will mount with a Windfall Tax on utilities which I'm very happy to go into, our proposal for a Minimum Wage that will give a floor to incomes from work, and avoid the State having to subsidise what may be exploitive wages by employers; and, our reforms of the tax and benefits system taken together will mean that there is a powerful reward for people who move from welfare to work. And we end what I think is a crisis situation in Britain, where there are twenty per cent of households in this country, twenty per cent, an astonishing figure, where no one is working at all - twenty per cent of non-pension households. We've got to do something about it. HUMPHRYS: And your underlying assumption is that many of that twenty per cent, many of those people aren't working because they don't want to work because they can't make enough money if they do? BROWN: It's not that. It's the position they face on benefit is that immediately they try to better themselves and get into work they do not get any reward for it, and ... HUMPHRYS: It comes down to the same thing doesn't it? BROWN: Well, I'm not blaming the people as your film suggests that I was - not at all. In fact what I'm saying is that the Conservatives have created a tax and benefit system which is a powerful disincentive and actually does not reward people from going to work. In spite of all the rhetoric we've had from the Conservatives they are not making it easy for people to move from benefit to work. I want to make that happen, but it's a combination of changes; active employment policy, Minimum Wage and changes not only in the tax system but in the benefits system as well. And, that's what I was announcing yesterday. HUMPHRYS: Right. And you're assuming that if you change that, then many of those people who aren't now working will work? BROWN: Well look, you've got to do something about it. You can't continue with a situation where there are maybe four million households in this country, non-pension households, where no-one's bringing in a wage, and you can't continue also I may say with a situation where three-quarters of a million or so of your under-twenty-fives are not working. You've got to do something about it, and we are prepared to take the hard choices, make the tough decisions. And, that's why I've said I will have a windfall tax on the utilities so that we can break the logjam of unemployment, that's exactly what we can do in Government. HUMPHRYS: You say you would like to cut the starting rate to ten pence. Would that be across the whole band, or would that be phased in, or how would that work? BROWN: Well, I think inevitably you would phase it in, and we would make a start when we make our announcements for the Election manifesto. But, I may say that it's a change in the tax and benefit system. So, people on benefits should not lose from the tax rate being cut in any way, and that's why you'd have to adjust the benefit takers as well. So,
it's a change in the benefit and tax system, to give people the chance to get better rewards not only from going into work. But one other astonishing fact that I think people have got to recognise is that sixty per cent of the jobs that go to the unemployed as they move into work are part time and temporary, and very low paid indeed. And, in many ways, the first job that people get as they go back into work is a transitional job. It's an entry job as some people call it, and therefore you've got to make it possible for people to move within the labour market, once they get back into work into a better job. And, of course, the ten p rate is not only fairer, it brings more people benefit. But of course is a powerful incentive for people to move up the employment ladder. It will mean more people get good jobs. HUMPHRYS: You're quite clear that that would be in tandem with lowering benefits in line with that. I mean there would have to be - the benefit takers as you describe them. That would..... BROWN: You wouldn't want to have a tax cut, and then have a position where people on benefit, on for example Family Credit, or on Housing Benefit who were in work couldn't get any benefit from it. HUMPHRYS: Right. Yes. BROWN: And, arguably, although there was some criticism from Mr Dilnot of my proposals, I don't think he has understood, and I think the film was based on an misunderstanding that you would have an adjustment both in the tax and benefit system. And, it is actually bringing the tax and benefits system in it together in a way that can tackle the problem of unemployment. HUMPHRYS: Yeah. Perhaps they don't understand because you haven't been clear enough, so let's try and be- BROWN: I was pretty clear yesterday in a fairly detailed speech. HUMPHRYS: OK. But, let's just be clear about this. You would lower, you said - talking about lowering the benefit takers for Family Credit, Housing Credit, Housing Benefit. BROWN: Housing Benefit and Family Credit. HUMPHRYS I'll get it right in a moment. BROWN: Well, if you're having a tax cut you would have to make adjustment to that as well, and the whole plan that I've got is to use the Minimum Wage and of course active employment policy through the creation of jobs with these reforms of the tax and benefit system to get people back into work. HUMPHRYS: Right. BROWN: It has been very carefully thought out and it is about making the tough choices, but of course the prize for a government that does it is getting people back into work reduces your benefit bill over time. HUMPHRYS: I take that point. BROWN: And, of course you are then able to do what we want to do in terms of both the public services and sustainable tax cuts. That's why I think that when the country understands the full detail, both of my youth unemployment measures which are very extensive, and my measures to get people from welfare to work on which I've been working with David Blunkett and Chris Smith, they will welcome them. HUMPHRYS: Right. So, let's try and help them by being a bit more explicit if we can. Housing Benefit seventy per cent, Family Credit sixty-five per cent. They would come down? BROWN: The table would be adjusted, just as the tax rate is adjusted and therefore... HUMPHRYS: Adjusted downwards. BROWN: Yes, adjusted downwards. HUMPHRYS: Let's be absolutely clear about that. BROWN: Just as the tax rate would be adjusted downwards and that means, of course, that, in contrast, to what was being said on your film, more people benefit from that change than would benefit, for example, from the normal way of dealing with the problem of releasing people from poverty, which is raising Personal Allowances. And, not only would more people benefit but can I also say that it's actually a fairer way of using resources because if you merely raise Personal Allowances in the taxation system and don't take up my proposal for the tax and benefit changes, then, people on the top rate get twice as much benefit from the change as people on the bottom rung. HUMPHRYS: Right. So, it's a double 'whammy'. tax and benefit takers. BROWN: Well, I think, it's a very sensible reform that actually makes it possible for us to move people from welfare into work and therefore, you see my tax proposals are based on principle. They're based on creating employment opportunity and they're based on being fair and, of course, they're based on being honest. Now, you cannot say that about anything that happens under a Conservative tax system that is based on Electoral expediency. A tax cut before an Election, tax rise after an Election and, of course, has done nothing to solve the problem of getting people into work. HUMPHRYS: If you really want to help the lowest paid, wouldn't it be better to try to take them out of the tax system altogether by raising the threshold, at which they begin to pay taxes? BROWN: Well, that's exactly the point, John, I was making. I was saying that some people on your film seem to be under the impresssion that simply raising the Personal Allowance, raising the threshold, as you put it, is the way out of the problem. HUMPHRYS: Well, I only say that because that's what the Social Justice Commission says. BROWN: Well, I've looked at the Social Justice Commission. You don't expect me to accept everything that is proposed by the Social Justice system. HUMPHRYS: Oh, I don't expect anything. I'm merely asking you about it, if you're telling me you reject the Social Justice Commission on that, that's fine. BROWN: We've accepted on many things but, on this particular instance, I believe that what I'm proposing is not only fairer but, of course, it gives a tax cut all round, if you can achieve it, because you're reducing the.... HUMPHRYS: Ah, that's the point. Everybody benefits, not just the lowest paid. BROWN: You're reducing the starting point from twenty p overtime as resources allow, when it's affordable - let's be clear about this to ten p. But, that is the way that modern tax system should work and it's based, clearly, on principle. Encouraging work and opportunity and, of course, being fair - both at the same time. And, I want a tax system that I'm associated with to be based on these ethical principles that you're encouraging work and rewarding effort and, at the same time, of course, you're being absolutely fair to people. HUMPHRYS: I may have missed something here but I'm not sure why it is preferable to do it the way you describe, rather than raising the threshold. BROWN: Because if you raised Personal Allowances, then there's a disapproportionate benefit to people at the top because they get the benefit of a Personal Allowance... HUMPHRYS: But, you've just told me that they benefit anyway. Everybody benefits, you say. BROWN: Well, of course, they benefit but they get twice as much benefit from the change - the Personal Allowance change - than they do from the change that I'm proposing. You see, if you raise Personal Allowances, then, some people get the benefit of that at the forty per cent rate. If you do what I'm doing and have a ten p rate all round, then, there is no disapproportionate benefit to people at the very top. It's something that hasn't been carefully enough considered by those people who would want simply to go around raising Personal Allowances. My proposal is both fairer but, also - let's get back to the central point - if you want to encourage work and employment opportunity and reward hard work and effort you are sending a powerful signal to people with a ten p rate. HUMPHRYS: And, that's what you want to do. Is any of it do'able, achievable, now? BROWN: Well, if the Chancellor was sensible about his Budget, he'd be looking at my proposal. And, I think, there is a strong case for it. But, let me say, also, that this is a proposal that goes beyond one Budget, or, indeed, two Budgets- HUMPHRYS: I take that point. BROWN: You see, I think, people have forgotten that John Major has set out the objectives for the Conservative Party in taxation policy during his Leadership Election. HUMPHRYS: Yes, he wants to cut the standard rate. BROWN: No, he wants to abolish Capital Gains Tax and he wants to abolish Inheritance Tax. Now, the cost of doing that is more than four billion pounds. We've shown that it helps only a small number of people and it does not do anything for employment opportunity or for fairness. HUMPHRYS: But an even longer standing objective is to cut the Standard Rate isn't it, let's be absolutely clear. BROWN: Let me finish this point because there is a clear contrast now in the directions in which both Parties want to do. Now, of course, when resources are available we want to cut taxes for middle and lower income Britain but the Conservatives want to abolish Capital Gains Tax and Inheritance Tax to help a few. Our objective, when affordable - and that is the difference between us and the Conservatives - is that we want to cut the starting rate of tax. HUMPHRYS: Right. BROWN: And, it would be cut over a period of time, as resources allow. But there's a clear choice between the public at the next Election of fairness versus unfairness. HUMPHRYS: But, let's look at the other thing that they want to do and many people assume that he's gonna do it, in the Budget, in a couple of weeks from now and that is cut the Standard Rate. What you're saying quite clearly from everything you've said this morning is that if he uses whatever money is available to cut the Standard Rate from twenty-five pence you would oppose that. BROWN: Well, I'd prefer him to look at our proposals. But, look... HUMPHRYS: Well, would you oppose it? That's a pretty straightforward question that. BROWN: It is a straightforward question. I'll give you the answer that I've given on a number of days - including yesterday, when I was asked.... HUMPHRYS: And, I'm puzzled by it - to be absolutely honest. I don't know what your answer is. That's why I'm asking you again. BROWN: I don't know why you should be puzzled. You should have listened to what I said. HUMPHRYS: I not only listened but read it. BROWN: In being interviewed on a number of programmes over the last few days I've said: look as far as Kenneth Clarke's Budget changes are concerned, we're going to have to look at them as a whole. We will ask, when he produces his changes, are they sustainable. In other words, can they last over a period of time, or are they just a gimmick? We will ask, also, are they fair? And, that's of course, why we raise the question of VAT on fuel. HUMPHRYS: But you've just been telling me that wouldn't be fair to do that. BROWN: And, we'll ask whether they create employment and opportunity and we will look at these changes as a whole. You're asking me to speculate on a hypothetical proposals that we haven't yet seen. HUMPHRYS: Oh, no. No, no, no. That is exactly what I'm not doing because you have... BROWN: Well, John, if you don't know what the Budget is, you can't ask me, therefore, to make a judgment on something that's completely hypothetical? HUMPHRYS: Ah, but I can, you see, because what you have said this morning. No, no, let me explain. What you've said this morning is that your proposals are based on principle. BROWN: Exactly. HUMPHRYS: Based on fairness. BROWN: Exactly. HUMPHRYS: And, that they must have - as I understood you to say at any rate - they must have a degree of priority because these are the things the country needs at the moment. Now, all I'm saying to you, therefore, is to agree with me. And, it seems pretty obvious that if the Chancellor does something diametrically different to that - opposite to that - you, naturally, one would assume would say: we will oppose it. But, you're not saying that. BROWN: But, John, of course, my proposals are fairer because that is what the Labour Party is all about. HUMPHRYS: Well, therefore, you would oppose what the Chancellor.. BROWN: Of course. But we have got to look at these things over the......middle and lower income Britain have suffered the equivalent of a seven p rise in Income Tax. There have been twenty-one tax rises. For millions of people, standard of living is still falling and we have got to look at whether the benefit that people will get from a tax cut is something that we can justify, in terms of the principles that we're putting forward. HUMPHRYS: You're wanting to have this both ways, aren't you? BROWN: Not at all. HUMPHRYS: You want to be able to say: This is our principle. This is where we stand. On the other hand, if there's something else around that may benefit the middle income earners as well and the better off as well, we're not actually going to oppose that. So you're saying... BROWN: Look, John. Look, John. HUMPHRYS: You're saying we want this but we'll oppose that. It doesn't wash, does it? BROWN: Look, John. The principle is doing something about the problems that face this country. HUMPHRYS: Exactly. BROWN: I want him to introduce a Windfall Tax in the utilities to get Britain back to work. I want him to look at our proposals for fairness, in relation to both VAT on fuel and in relation to cutting the starting rate of tax but I've got to look at the Budget as a whole and you can't tell me today that you know the contents of the Budget and would want to make an advance judgment on it. What I say, however, is that the principles that I am laying down are principles for a number of Budgets over a longer period of time and are principles that will be adopted by a Labour government in office. HUMPHRYS: I'm reminded of what Cecil B de Mille allegedly once said: Gentlemen, those are my principles but if you don't like them, I've got others. What you seem to be saying is.... BROWN: Not at all. HUMPHRYS: What you seem to be saying is: Gentlemen, those are my principles but if the other Party wants to do something which is going to appeal to the sort of people we desperately need to put us into power next time, we won't oppose it. BROWN: No, because I'm saying very clearly if the Conservatives abolish Capital Gains tax in the Budget we will oppose it, everybody should be clear about that. HUMPHRYS: Right, you're clear about that even though you don't really see, that's a hypothesis as well. BROWN: If they abolish Inheritance Tax in the Budget we will oppose it. HUMPHRYS: Another hypothesis. BROWN: If they introduce a Windfall Tax in utilities we will support it. If they introduce a welfare to work programme we would be very happy because we want to deal with the problems that come. HUMPHRYS: And if they cut the standard rate of tax. BROWN: We will judge that by the principles that I've laid down, is it sustainable because we don't know what the public borrowing figures are yet, they are changing almost every day, is it fair, in other words, is it helping people, we've got to look at these tax proposals as a whole, does it create employment opportunity in this country and of course is it honest which is one question we've got to put to the Conservatives all the time, since they've broken their promises on taxation. HUMPHRYS: I will give up on that, let's move instead to the Windfall Tax, the use to which you were going to be that, a billion pounds helping under 25s get into work. BROWN: And much welcomed throughout industry though your film doesn't reflect that. HUMPHRYS: I'll take your word for that. Not much welcome though if we're to believe what we read on the part of the Shadow Cabinet who are deeply worried, at least half of them are deeply worried because they don't like the idea that kids who don't sign up, young people who don't sign up for it, for the sort of work schemes that you have in mind, are going to have their benefits cut. BROWN: No, you mustn't believe all you read in one.....absolute nonesense. HUMPHRYS: Robin Cook wasn't happy about it. BROWN: Well you'll have to ask Robin Cook but there was a general welcome.. HUMPHRYS: You were there and I'm asking you. BROWN: The Shadow Cabinet is a meeting where at least there is confidentiality and I want that to be the way that we proceed. You can't have a Cabinet or a Shadow Cabinet where you have regular bulletins from it. But as far as the youth unemployment proposals are concerned what I
said is that we've got the first plan that any party has had for twenty years to do something about this enormous problem that is causing so much social division. Six hundred thousand young people out of work. We are prepared to put resources into that, to get young people back to work. We are providing options for young people to choose from and they choose jobs, not schemes. I don't like this word "schemes" because these are not schemes, these are jobs with wages and training opportunities. And of course in that circumstance, where high quality offers, a choice of four particular options is available and many more jobs as part of that, then we would apply what has been the traditional Labour way of doing it, that if people of course don't want to take up the job that is on offer, then there would be a deduction and I think the country understands that you've got to balance in the modern world opportunities which are expanding with responsibility. There are no new penalties, but there are many new opportunities. HUMPHRYS: But written above the Brown economic store: is this offer good for one Budget only, for one year only. It's a one-off isn't it, that's what's worrying so many people. BROWN: I would like it to happen in this Budget. As far as the General Election is concerned I believe that the Windfall Tax will be implemented after the Election and I believe that it will be able to cover the expenditures that we will meet over a period of years. In other words... HUMPHRYS: What, is one Windfall Tax going to do for many years? BROWN: Yes and that has been made clear in every policy document that we have put forward and I've discussed this on many occasions. I'm not levying the Windfall Tax just for one year's expenditure, I've levying the Windfall Tax to cover a number of years' expenditure, diminishing expenditure every year as we get people off benefit and I would say that it might take as much as a parliament to be able to deal with all the problems...... HUMPHRYS: Well that's five years isn't it, and yet you are only going to raise at the very most between two and three billion from the Windfall Tax. I can't do the sums, it doesn't add up. BROWN: Of course you can do the sums. HUMPHRYS: Well I can't. BROWN: Of course you can do the sums because of the whole logic of my proposal is you break the logjam of unemployment as you get people gradually back to work, and of course in year one you'll have more people who will be helped by the scheme than in year two and year three because more and more people will be going back to work, and as you get people back to work they become taxpayers rather than benefit claimants. And the whole logic of the position is that a Windfall Tax as a one off exercise is necessary to break what is a logjam in our society that we are paying huge benefit costs and at the same time we are getting no benefit from it in terms of jobs. HUMPHRYS: We're talking as we heard in that film, about one third of one per cent out of the total economy, that is a billion out of seven hundred billion. Are you honesty saying that that is going to do the trick, that that is going to solve this huge, by your own definition, enormous problem, it doesn't stand up does it. BROWN: All the evidence is that we can make a big impact on this problem. HUMPHRYS: And then you've got to keep it going. BROWN: Yes you keep it going but the more people who get back to work in the first year, the less you will have to do in year two and year three. Look I think the country understands this very well, we're paying twenty billion plus in benefits and lost taxes to pay for unemployment, it's costing the average family twenty pounds a week. Now you can either continue paying the bills for two million people unemployed for ever, or you can do something about it and my proposals have a plan to deal with youth unemployment, we have measures to deal with the problem of longterm unemployment... HUMPHRYS: You're not going to put any other taxes up at all, to pay for any of this in a very short time... BROWN: Let me finish...breaking the logjam by using the Windfall Tax to get people back to work is incredibly important and the more people understand my proposal the more business understands that it ought to be done and indeed ordinary businesses are pretty angry about what's happening in the privatised utilities and support... HUMPHRYS: And in a sentence - no taxes going up? BROWN: Well I don't want to raise taxes, I want taxes to come down. HUMPHRYS: Gordon Brown, thank you very much. BROWN: Thank you. ...oooOooo...