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ON THE RECORD
RECORDED FROM TRANSMISSION BBC-1 DATE: 11.7.93
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JONATHAN DIMBLEBY: Good afternoon and welcome to On The
Record which comes to today from Westminster on the first anniversary of the
election of John Smith as leader of the Labour Party.
A year ago Labour was still in trauma
after its fourth election defeat in a row. Neil Kinnock resigned, making way
for Mr Smith who pledged himself to continue the reforms that his predecessor
had initiated. Since then he's claimed that his "new politics" as he puts it,
"embracing change as an ally" make it certain that Labour will win the next
election. But Mr Smith's critics inside and outside the party are far from
sure about that. He has been described - too often for his own liking no doubt
- as the "the best leader for the last election" and too cautious to take the
bold initiatives required to win the next.
In the meantime his authority as leader
is being tested to the limit by his conflict with the Trades Unions over the
principle of One Member One Vote. At the moment the odds are against him.
Unless he can persuade the unions round to his view he faces the prospect of
defeat - and thereby humiliation at the Labour Party Conference in the autumn.
Mr Smith, I touched on the criticisms
that are made of you. Cautious, complacent comes up frequently. What do you
say to that kind of criticism?
JOHN SMITH MP: I think it's not true, but I think
there's nothing wrong with people being careful about the policies that they
adopt, but I believe very very strongly in the ideals that brought me into
politics and I want to see these put into practical politics that we can put
forward as a Labour Party for the benefit of the people of this country. I
have a particular personality, I'm not dissatisfied with it myself, but it's
not for me to pass judgement on that.
DIMBLEBY: If you're not complacent, and if now a
year in from your leadership you look back, do you have a pretty clear view of
why the voters rejected the Labour Party at the last election?
SMITH: Well, there's a number of reasons why
they rejected it. The principal one I think that's now becoming clear is that
they believed the Conservatives, that there wouldn't be increase in VAT, that
there wouldn't be cuts in public expenditure, and I think the prevailing mood
in this country at the moment is that the people believe they were conned at
the last election, and they bitterly regret having put in a Conservative
government that has behaved in the way it has done over the last year. I think
that's the prevailing mood in the country, but of course there was also a lack
of confidence in the Labour Party, otherwise we would have won the election and
it is my task as the leader of the Labour Party to put these matters right, to
so explain our economic policies that we will create the confidence which I
think there ought to be in this country that we can create a strong and
sustainable economy, that we can create a more socially just and opportunity
creating society, and also reform our Constitution and our democratic way of
doing things in this country.
Now, there's a lot of issues there, all
of which I think it's our duty in the Labour Party to devise policies for, and
then to campaign vigorously for them so that we capture the hearts and minds of
the electorate of this country well before the next election.
DIMBLEBY: Now we want to obviously to come to
quite a number of those things, but just before that do you think that the
image of the party, or the priorities of the party, before the last election,
that you say there were problems with the party, were, as it were, out of touch
with the priorities or not enough in touch with the priorities and concerns of
the voters?
SMITH: I think we were in touch with lot of
concerns of the voters, but I don't think we had been able to persuade them
sufficiently that we could carry through the changes that would be necessary.
I think there's a very very strong support in this country, for example, for
the National Health Service, and for good public services, and I think people
identify the Labour Party with that. I think there was less confidence so the
polls tell us, in the economic policies of the Labour Party. Now I think that
that was a wrong judgement and I think people realise that now in the period
since, but that was the view at the time and that's something we have got to
deal with.
DIMBLEBY: You see because Tony Blair said, he used
this phrase: "Society changed and we did not change sufficiently with it",
which suggested it was behind the times.
SMITH: Well, I think there is something in that
in that people looking to a society see in terms...see it in terms of
individual progress, but as Tony has said, and as many of us have said, there
should not be in a modern society a polarisation between individual opportunity
and a good community. Indeed, a good community, a strong community, one that
has got good public services and creates opportunities is one of which an
individual can both prosper and flourish. And now that is the message which I
think we need to get across, it's what we believed before the election, but we
have got to keep stating it clearly and eloquently so that the message gets
home.
DIMBLEBY: Now, in the process if you like of
redefining or reshaping for the period ahead, in order effectively to
proselytize for your new politics, you have first, I presume you would agree,
to dispell the image, and to the extent that there is reality as well, the
reality, that the Labour Party is in thrall to the vested interests,
particularly of the trade union movement.
SMITH: Well, I think we have to make some
changes in our Constitution, but I don't think the Labour Party has ever been
enthralled to the trade union movement. I just don't accept that as a reality,
we have been close allies of the trade union movement and I regard them as very
close and valuable allies.
DIMBLEBY: But don't you think that in the public
mind the very thought of a party in which leading up to the year 2000 in which
the trade unions have enormous influence and power in its organization and
decision making, is anathema.
SMITH: No, I think that is grossly over
estimated. I think the trade unions are our willing partners and one thing I
am very clear about and which I think must be developed in the course of our
arguments over the months ahead, is that I do not want to severe links between
the Labour Party and the trade unions, I'm proud of them, indeed I want to seek
ways in which we can strengthen them and the alliance that there is between
trade unions and the Labour Party to advance the interest of the people of this
country to get them better conditions, better social opportunities, that's a
very valuable thing I think in British politics. Certainly in the Labour Party
we regard it as a very valuable support.
DIMBLEBY: But in modernising that support, in
reflecting the kind of party that you want now, the notion of what is called
OMOV for short, One Member One Vote within the party, is vital for you to
secure.
SMITH: I think it's vital for the Labour Party,
particularly in the selection of our Parliamentary candidates, that One Member
One Vote be our guiding principle. Under my predecessor we carried through
very important changes in transferring responsibility and power in the Labour
Party to the individual member of the Labour Party. Instead of decisions being
taken by committees in the constituency they are now taken, the fundamental
decisions, by the ordinary members who cast their votes on a One Member One
Vote basis. We have to carry that process, which is complete as far as the
Labour Party members themselves are concerned, into our affiliated
organisations as well.
DIMBLEBY: Now if you can't achieve that, if you
don't get OMOV before the next election, or by the next election, you would
regard that, you say it's vital for the Labour Party, as extremely damaging for
the Labour Party.
SMITH: Well I believe we will carry through
these reforms not just before the next election but at our next conference.
Indeed I think it's important that we should carry them throughout our
conference, because I think it's a necessary phase in which we've got to go
through in which we look at our own constitution and I think bring it up to
date and reform it properly, but I don't want to spend an excessive amount of
time on that because there are other important things for the Labour Party to
do.
DIMBLEBY: So you want to get these constitutional
reforms as indeed you said before, sewn up, completed, it's essential to do
that by this conference?
SMITH: I think so, yes.
DIMBLEBY: To go beyond that is not on your agenda.
SMITH: No, I want to see them dealt with by
this conference because I've got other important things to do as has the whole
party after that, and I also want to get on with the business of selecting our
candidates, getting them into the constituencies and doing the active
campaigning on the ground.
DIMBLEBY: Now let's get then as clear as we can
because it's complicated territory, exactly what you are after. Take the
selection of candidates. You believe if I'm right that this should be done on
the basis of One Member One Vote, within each constituency where a candidate is
going to stand. That's what you're for.
SMITH: Yes.
DIMBLEBY: And that is, when we say one member we
mean one paid up member of the Labour Party.
SMITH: Yes.
DIMBLEBY: And that is the only form of membership
that in this context is the relevant form of membership?
SMITH: Yes, but I've also suggested that we
should take account of the fact that our trade union colleagues who pay the
political levy should be invited to join the Labour Party on a basis which
recognises their existing contribution through their political levy. In the
jargon of the consultative process it's called levy-plus. It's a sort of
special scheme whereby they can become members of the party, but they become
full members of the party entitled to vote not just in the selection of
parliamentary candidates but in any other work of the constituency parties as
well.
DIMBLEBY: But when you say levy-plus what we're
talking about effectively is people will become full members on a discount
basis. they don't have to pay the same amount of money as the members who
don't come in via the trade union movement.
SMITH: Well, I wouldn't put it that way because
I think it is taking account of the fact that they already pay money through
their political levy to the Labour Party and I think it's only fair to take
account of that, but it's also there to encourage them to join it, because I
don't just want One Member One Vote, I want many more members, many more votes,
and the more of them that can be levy paying trade unionists as far as I'm
concerned the better.
DIMBLEBY: So what you're saying is if you're a
levy paying trade unionist then you can for nothing come and join the party on
that basis. I'm not suggesting there's anything wrong with that. Is that what
you're saying?
SMITH: No, I'm not saying that at all.
DIMBLEBY: What are they going to do .....
SMITH : Because I'm saying that they've got to
pay above the levy, that's why I call it levy-plus.
DIMBLEBY: Okay.
SMITH: And what you've just described is not
what I said as a matter of fact.
DIMBLEBY: No, no, I'm really trying just to get
this right. So you call it levy-plus. If I call it in crude terms discounted
membership, I don't mean that in any form of attack on it. It is merely that
for less money they can come along if they pay the levy and join the party and
be full members of the party.
SMITH: Well, because they pay the political
levy that's taken account in the membership fee that would be - that they
would be asked to contribute, but when they join the party they are full
members of the party, because I think it's important not only in this context
that we have One Member One Vote, which of course is the principle trade
unions themselves apply in their own individual elections, but that we should
have votes of equal value, that the vote that one person casts is as important
and valuable as the vote that another person casts.
DIMBLEBY: And therefore you have to say to your
trade union friends, "You can't just as supporters have a vote in this process,
you have to be a member in the terms in which you've just described to us"
SMITH: There are difficulties about saying that
just because you pay the political levy that that automatically should entitle
you to this participation in the selection of a Labour candidate. I mean there
is a Conservative member of parliament, Mr Peter Bottomley who for his own
reasons chooses to pay the political levy. I hope it's not being suggested
that he should take part in the selection of his Labour opponent at the next
election. It is important that the people who take part in that are
identified with the Labour Party, who support the Labour Party. We don't want
people from other political parties or supporting other political causes taking
part in our internal democracy.
DIMBLEBY: That - can I put it this way to you
then: your position is and this isn't up for negotiation, there isn't some kind
of compromise around this. If you want your one member to have one vote and
all votes counted equally, you have your members, ones who are existing
members, plus those who you call levy-plus, the trade unionists who say "Yes,
we want to be full members of the Labour Party" - they in their constituencies
can vote for the candidate, that is the only game in town.
SMITH: Well, that's the principle that I want
to see applied, and it's a very clear one and it's one which I think should be
understood by all.
DIMBLEBY: And you're not prepared to back off it.
SMITH: It's not anti-trade union, but it's ...
DIMBLEBY: You're not prepared to back of it.
SMITH: I think that's the policy for which I
stand and I think that's the one that we should carry through.
DIMBLEBY: And you will fight for that?
SMITH: Of course I will.
DIMBLEBY: And you will not yield on that?
SMITH: I will fight to persuade the Labour
Party that that is the right and proper way for us to select the candidates for
parliamentary elections, but let me just say one thing about trade unions. You
assume that all trade unions are lined up on a different side of this argument.
That is not the case, there are divided opinions amongst the trade unions. One
very important trade union, the AUEW for example is very firmly and
clearly for One Member One Vote, and just as the constiuency parties have
different opinions so do the trade unions have different opinions, so it not a
massive kind of confrontation between either the leadership or the membership
and the trade unions. There are divided opinions and so we have to make a
decision.
DIMBLEBY: We know it's an enchanting, friendly
conversation between you all, but the fact of the matter is that despite what
you say about AUEW that the votes and you wouldn't say at the moment it was
otherwise, the votes in the unions are stacked up against you, a, and b, what
fifty per cent of the constituencies are also stacked up against you?
SMITH: Well, that's not my understanding or my
appreciation of the situation and indeed the constituencies will not be able to
take their decision until the matter comes before them and they go through
their own processes of internal democracy, at the run up to the conference, and
I think there is strong support in the constitutencies. What is more ...
DIMBLEBY: Can you discount what we hear in the
papers today, in fact On the Record's poll last week of those who have made up
their minds that showed a majority of ....
SMITH: Well, there are six hundred plus
constituencies in the Labour Party and you get nowhere near canvassing anything
like that, and these are the people who will be taking the decisions when the
precise changes are put forward by the National Executive Committee after we've
finished the period of consultation which has just come to an end. Now the
National Executive must formulate the precise proposals and put them forward
for the consideration of our constituency parties, our affiliated organisations
prior to the decisions being taken at conference.
DIMBLEBY: No let me go on. You've made your
position clear on the selection of candidates. Let me go on to the selection
of the leader which we haven't just touched on. Now, your view last May was
very clear. You did not think that the unions should be involved in that
decision either. That was your view then. I'll quote it to you. "My own view
is the trade unions should not be involved in electing a leader. This should
be for party members and MPs." Is that still a matter of principle for you?
SMITH: Well my view was stated because I did
like the way in which the trade unions were taking part in the constitutions we
had then. For example, some unions voted... they actually voted for me, as it
happens, but they did not consult their members and there was a decision taken
by the executive committee or whatever. Now I didn't think that was a proper
basis for them for take in it and that clearly needs to be reformed. Some on
the other hand did and my experience of the ballot itself made me much more
sympathetic to the notion of unions, trade unionists taking part on the basis
of an individual ballot when that was done by a union which was a very healthy
thing and indeed, added to the numbers of people that took part in it but I was
opposed and remain opposed to the notion of trade unionists taking part in that
on a block voting basis but I can see the argument and I think it's got merit
that if you can get rid of the block vote so that individual levy paying trade
unionists can take part as individuals so that the votes are not added up and
all cast together but they vote genuinely as individuals and there is a
basis upon which we know they're Labour Party supporters, then I don't see in
principle any reason why they should not take part in the elector of the leader
and the deputy leader.
DIMBLEBY: Now are we talking about what some
unions have proposed, an electorial college in which you have a block for
MPs and MEPs, a block for constituency party members and a block for levy
paying trade union members as individuals?
SMITH: Well it's not just trade unions who
thing about an electorial college, we all think about an electorial college
because if you're going to give Members of Parliament a special role in this
process which I think is right because the leader has to be leader of the
parliamentary party as well, then you're bound to have an electorial college.
It is the elements of what is in it.
DIMBLEBY: So are you unequivocally as it were,
offering to the trade unions on this score on the leadership, yes, I will go
for a block so long as the unions are in there only as members, as individuals
with a share, a proportion of the vote?
SMITH: As I indicated I think a week or so ago
in an interview in the Financial Times that I think there would be a case for
individual trade unionists taking part in the election of the leader and
deputy leader of the Labour Party provided we can get certain principles
established and that is that we see an end to block voting, a large number of
votes being cast either with no consultative process or an inadequate one. And
that the individual vote counts for what it's worth, that it's not swallowed up
in some larger total and also that I know that the people who are taking part
in that are Labour supporters and we make some effort to establish that and I
think that would be a wider number of people taking part in the election for
leader, the leader of a national political party. Now the more people that can
take part in that election, in my opinion, the better.
DIMBLEBY: Now you've explained there two different
sets of rules - one for selection of candidates, the other for leader where
there's obviously potential ground for doing a deal. But why is the principle
of One Member One Vote so important when it comes to selecting a candidate and
not so important when it comes to electing the John Smiths?
SMITH: Because when you are involved in the
local constituency party you're part of a team who select the candidate and
then go on with that candidate to fight in the election and I think it's
reasonable to say to every paying trade unionist who come along and join in
that team for the decision, join with people who are already paying a
membership subscription to the Labour Party - eighteen pounds a year if they're
full members and five pounds if they're unwaged - that you should make a
contribution to the party, to the local constituency party and participate on
that basis. And that is a... and not only that, be part of the party, be part
a member of the party and take part not just in that part of its activities and
it is also a way in which we can make sure that the votes are of equal value.
DIMBLEBY: Now you've been very clear in making now
this possibility, this option available but I can hear trade union leaders now
who don't even want to buy that and are saying, well, phew, he's given way on
that, this is great we're still some way away, he'll soon be giving a away on
candidate selection as well.
SMITH: It's not a case of giving way on
anything, it is a case of finding the best system for doing it and I believe
that if we have a large number of people taking part, with the reformed system
there will no longer be block voting and that individual trade unionists have a
vote which is cast for the candidate of their choice and that's taken full
account of. Then I can see that that is a sensible way in which we broaden the
constituency. Now do remember what we're trying to do, we trying to get
elected as leader and deputy leader of the Labour Party the person who commands
most support amongst Labour members and Labour voters and supporters. Now that
is the task and I believe that I must try and find as leader of the party the
best way in which that is done and I think that is a way in which it could be
done. Now I've taken account in thinking of that of my own experience of the
leadership election which confirmed by objection to the block voting but I also
impressed by the fact for example, that people came up to me and said that they
had taken part in the ballot as part of the trade union balloting procedure, I
thought that was very good that they had done that but it was still unfortunate
that it exaggerated the result and if I may so, it's almost a point against
myself, in that I was given an exaggerated majority in the Labour Party...
DIMBLEBY: Over Bryan Gould.
SMITH: Yes, over Bryan Gould, not just in the
trade unions, let me add, but also in the constituency parties where there's
block voting as well which I think should not be the case.
DIMBLEBY: You've now made a very clear offer, a
very clear position on both these fronts. The unions have got to shift if
they're going to do a deal now, that's correct, I presume. Neil Kinnock's
described them at the moment their stand as ostriches. Are you with him in
saying that if they don't move they will be burying their heads in the sand?
SMITH: No, I'm not going to indulge in
exaggerated language or in personalities in this argument, it's far too serious
for that.
DIMBLEBY: Alright.
SMITH: It is about reforming the Labour Party
and getting a good constitution both for the selection of parliamentary
candidates, for casting votes at conference which has dipped a little from
public consideration because it's not so controversial and also for electing
our leader and deputy leader. Now these are serious matters and it's my task
as leader of the Labour Party to help the party reach a situation of which we
have modernised our constitution upon the clear principle for the selection of
our candidates particularly, of One Member One Vote, we're got a defensible
system.
DIMBLEBY: Given that you feel strongly about this
and you are going to fight for it, should the unions bear in mind that if you
don't get victory on the terms on which you've now put on offer, not only will
it be very damaging for the party but that for you it's a question of your
leadership as well?
SMITH: Well I think we should reach this
decision, I think the policy I am recommending is right, I think that when the
National Executive brings forward its precise proposals to the conference in
terms of our old changes that conference should accept these, and I think they
will. I am certainly going to put my authority as leader behind these changes.
DIMBLEBY: Now is your authority . . .
SMITH: That's the task of being leader.
DIMBLEBY: Of course. Is your authority, your
leadership, on the line. Are you saying to unionists watching, if for one
reason or another you don't come with me on this, you are putting me in an
impossible position as leader of the Labour Party?
SMITH: No I'm going to argue the merits of the
case, and that's the best way to do it. I don't believe that it is right to
be melodramatic about that, I believe that there is a strong and powerful case
for the changes which will be proposed.
DIMBLEBY: It's not a resigning issue?
SMITH: Well, I don't think it helps this kind
of argument to go into that sort of language or use that type of argument,
because I believe that we have to look at the merits of the case. Now, I hope
very much that the Labour Party and our affiliated organisations will look more
closely in the period ahead at the merits of case, and not, for example, start
to believe that somehow I or anyone else is trying to break the links between
the Labour Party and the trade unions because it is quite clear as you listen
to me, I think, that that is the last thing I have in mind. I do not want to
break these links, I want to strengthen them, I want to change them, I want to
make them more effective, I want to create a situation in which we have got a
bond of strength, both internally and externally.
DIMBLEBY: But let me just put to you once more
this thought, that if you are not able to persuade them, you are saying to
them, "you can't count on me simply swallowing that and carrying on".
SMITH: I will be fighting very hard to carry
these changes at the Labour Party conference, and today I am fighting equally
hard not to give you a news story of the kind you are seeking for.
DIMBLEBY: Let me go on on the, within the
framework of the new politics that you want to develop and the new economics
that you want to develop, on the assumption that you get the machine and the
Constitution constructed in the form that you have just described. Let me take
macro-economic policy. The critics say well there's nothing new, nothing
distinctive there, they charge you with "me-tooism" and they cite for purposes
of example the exchange rate, where the voices have been echoing one other
between Chancellor and Shadow Chancellor down the year.
SMITH: Well, I certainly said, and believed it
to be right, that in principle we should be members of the exchange rate
mechanism, and I believe that there is merit in being in an exchange rate
mechanism. However, what we have seen has been the lack of the government
following through intelligent economic policies with the result that the
failure to invest, both in plant, equipment, training and all the other defects
that we have seen in Conservatice economic policy, meant that our economy was
not strong enough to sustain the obligations. That is why we exited from the
ERM on Black Wednesday, and now we have still got the problems with our economy
and I think that before we can contemplate going back into any form of
obligation like an exchange rate mechanism we need to make sure our economy was
strong enough in order to withstand the obligations, but the problem, if I may
say so, is not with my side of the argument, it is with the Conservative Party
that failed to see the importance as well as macro-economic policy, of
important supply side policies like investment and training, regional
development, technology policy, all the other things that would give Britain
the strong economy that we desperately need.
DIMBLEBY: But if you take that exchange rate
policy that you now have, there are a lot people, not least within your own
party, who say it is madness that we stick to the Tory line on exchange rate
policy, we should have a different policy. But in fact what you have just said
to me, ERM down the road, managed exchange rates, you could have been the
Chancellor of the Exchequer on that?
SMITH: No, but the opposite to that is free
market policies, it seems to be that you just have no system at all, and let
the market decide, and I am not sure that that is a sensible policy for a
left wing parties to be proposing.
(BOTH TALKING AT THE SAME TIME)
SMITH: It's a rather academic argument at the
moment, because we were flung out of the exchange rate mechanism because we
elected a government that did not manage our economy sufficiently well. And
not only that, the manner and mechanism whereby they dealt with it meant that
Britain's reserves have been extremely badly depleted, a point that is not
often mentioned in economic argument, but one of the serious, I think, defects
of this government is that they have left Britain's reserves severely depleted
because of the incompetent way they handled the crisis over Black Wednesday.
DIMBLEBY: But if we leave the past behind, but I
would say in parentheses that the Shadow Chancellor and the Chancellor in the
run up to Black Wednesday were singing from precisely the same hymn book about
staying inside the ERM...you say no?
SMITH: No, because I was arguing positively and
vigorously for the economic policies for investment and training and the rest
that would give us the sort of economy which we needed. It is the failure to
do that that is the real reason why Britain was unable to maintain its
obligations.
DIMBLEBY: Obviously I don't want to go into great
detail on the past, I want to come back to the present, but Gordon Brown, I
remember it very well, in the five days or so before we reached Black
Wednesday, on 11th September, said "we are not in favour of devaluation, we are
not in favour of revaluation within the ERM". That was the same song book, the
same note as Norman Lamont.
SMITH: We debated this very thoroughly in the
House of Commons. I believed, and said so, that when it became clear that the
Goverment could not maintain that obligation they ought to change their policy,
and that would have done a lot of things, it might have saved the whole system.
It would certainly have saved the depleting run on our reserves. But that's a
matter of record. We debated very carefully at the time.
DIMBLEBY: We get into very interesting history.
Let's get to the present again, and just let me remind you though, that what
you've said, everything which you've said, blaming the Tories for this, that
and the other, on the exchange rate, which is a pretty cardinal aspect of
macro-economic policy, you are the same as the government.
SMITH: I believe that there is some merit in
being in a system which manages exchange rates. Now, there are two schools of
thought in that in economic policy. There is the free market people, and there
is the people who believe that some system, flexible, adjustable, whatever it
is, is helpful in terms of creating circumstances of economic stability. In
general terms, I am in the latter school rather that in the former school, but
it's a rather academic question for Britain at the moment because we are a long
way from having an economy strong enough to be able to undertake these
obligations again.
DIMBLEBY: With respect, it is not academic if you
are a trading nation, and your policy on that matter. Now let me come to a
second area, the deficit, where again your critics say "you can't put a bus
ticket between what John Smith and his Shadow Chancellor and the Prime Minister
and the Chancellor say on the deficit. It's awful, it mustn't go any higher,
it's got to come down".
SMITH: Well I think our deficit is a problem,
just as high unemployment is a problem, just as a rising balance of payments
deficit is a problem. These are accumulation of serious economic problems that
arise out of fourteen years of Conservative economic management. But what I
deplore most of all is the fact that our deficit is caused by the decline in
our economic activity which has pulled down the revenues from tax but also the
cost of unemployment because people insufficiently take account in this country
of the fact the cost of unemployment is a burden on people in this country as
well as a disaster and a misery for the people and the communities who have to
suffer it.
DIMBLEBY: And it's precisely because of that that
your critics in the party and around the party - the John Edmondses - say he
shouldn't hog-tie himself to the deficit where it now is he should have an
emergency fund, increase the deficit by at least ten million in an emergency
fund in order to kick-start the economy and thereby by cut unemployment.
SMITH: Well I don't agree with that as a policy
and I've made that clear but I do think...
DIMBLEBY: It would be distinctive and new,
wouldn't it?
SMITH: Well whether it's right or wrong is
actually a much more important question and I don't agree with that and have
said so very clearly, as has Gordon Brown, and I stick by that but...
DIMBLEBY: Your singing the government's tune on
this particular matter.
SMITH: No, no, no, but, but, but, it is very
important that we look at schemes whereby we can use public expenditure to
improve our economy. I'll give you one example, capital receipts for housing,
local authorities have accumulated capital receipts which they ought to be able
to use to improve and build homes and get unemployed people back to work,
thereby bringing more money into the revenue through the taxes that are paid
and stopping unemployment having to be paid. Now that technically increases
the PSBR, I'm not going to argue about that because the common sense of doing
that is so obvious and so overwhelming and that's the sort of thing which I
think ought to be done.
DIMBLEBY: So when you say technical increases, you
would accept an increase in the PSBR by a certain amount over the present
level.
SMITH: Well the test is whether it will
strengthen the economy and give us a return. That is the case not....
DIMBLEBY: That's just a more timid version of what
John Edmonds is saying.
SMITH: No, no, it's quite different. Instead
of plucking some global figure and I'm quite... the basis of the figure that
have been quoted are. You don't do that, you do it project by project and say
let's look at this possible investment and transport infrastructure or whatever
it is. Now looking at that in terms of an investment will that strengthen the
economy in a way that will give us a positive return in terms of getting people
back to work and paying more taxes, not having to pay unemployment benefit in a
way that will help our public finances rather than retard it. That is how much
better of approaching it.
DIMBLEBY ......well let's say your answer to that
is yes, you then put the extra ten billion on the deficit but you say I've got
a good reason for doing it rather than John Edmonds' vague flowery reason.
SMITH: The point about it is surely that as a
result of that investment by getting people back to work you start to lower the
problem because you're not having to pay out unemployment.
DIMBLEBY: That's exactly his argument and he says
go for ten billion. How far are you prepared to go?
SMITH: No, I don't think you can discuss
economic policy in this way by sitting at home one day and picking out a figure
- ten billion, five billion, twenty billion. You must look at it in terms of
the projects, in terms of the job creating potential, in terms of the
strengthening effect.....have on economic policy.
DIMBLEBY: Given that you've done that John and
you've got transport policies and you've got the council seats..
SMITH: .....We've been launching these things
on the government let me remind you.
DIMBLEBY: ...but what people would like to know
is, is how much money, having urged this, you would be having made the
judgement you would now increase the deficit by?
SMITH: Now we would look at these things in
terms of the capacity to reduce the deficit as well...
DIMBLEBY: But you know it's going to put it up
first.
SMITH: Surely the point about the investment is
that if it's an investment that gives you a return like that then it is a wise
and sensible thing to do because it will start tackling the problem. What is
happening at the moment unfortunately is there is very little being done to
tackle the problem.
DIMBLEBY: Now if the deficit doesn't come down or
indeed, if it goes up and if your economic policies and even Labour governments
can be blown off course when they take authority. If you were blown off
course, I have to presume that you would be willing use the weapon of tax in
order to tackle that deficit.
SMITH: Well I think that we have to have a fair
taxation system and there are some changes that I would make now and if they're
not made now, make them in the future. For example, closing off tax loopholes
which I think is really quite a disgraceful situation today. We know from the
former Chancellor that there is a great deal of corporation tax not being paid.
He told us that shortly before he resigned. Indeed, the day the before he
resigned. That's something that should be tackled but there are tax loopholes
particularly for wealthy individuals which I think very much need to be
tightened up and I think it's appalling that we have a government that is going
to knock on the doors of the poor and the needy in society and say that they
have to pay more or to put VAT on millions of households in this country when
their first ports of call ought to be to the very wealthy people in our society
who are not paying their fair share of taxation and closing these tax loopholes
is something that I think urgently needs to be done in Britain. So we have
made these proposals and we've also, as I think you're probably well aware,
suggested that we should have a windfall tax on the monopoly profits of
privatised utilities of the kind which the Conservatives had on the banks in
1981. These are proposals that would bring and would be just as well because
these people are profiteering at the expense of ordinary consumers in this
country.
DIMBLEBY: You used to count yourself the prudent
Shadow Chancellor, Gordon Brown's certainly showing himself no less of your
mind on these matters.
SMITH: I think a little bit more than prudent,
highly imaginative is Gordon.
DIMBLEBY: Very well, I'm sure he'll be delighted
by the sobriquet. The deficit must not balloon by your account but you don't
cut public spending. If you don't get the growth that you want for reasons
beyond your control, I ask you, I'm not asking you whether, as you have been
asked, whether you would cut spending or increase taxes this autumn, I'm saying
are you ready, are you willing to say, yes I have to know that I've got the
weapon of personal tax increases and I cannot rule out that I might have to use
them?
SMITH: The most important thing is to get the
growth. That is crucial, instead of contemplating the possibilities of
failure, let's concentrate on creating the conditions of success.
DIMBLEBY: But you talked about trust before, at
the very beginning of this interview and it's that context, people... you said
at the very beginning of this interview, you talked about the people not
trusting Labour Party's economic policy. Now one of those areas is because of
this question of...is the economy potentially running out of control? I'll
come to the tax...
SMITH: It's a question of confidence...
DIMBLEBY: Confidence, very well. To be confident
people would want to know that you are not ever prepared to rule out raising
personal taxation to deal with economic difficulties like a ballooning deficit.
SMITH: Well I've already given you a number of
examples...
DIMBLEBY: In addition to those, in addition to
personal taxation is what I'm asking about.
SMITH: I want to see a fair taxation system in
this country but I'm not going to write the Labour Party's election manifesto
in the course of this programme. You wouldn't expect me to do that.
DIMBLEBY: And I'm not asking you to do that, as
you're well aware Mr Smith. I'm asking you...
SMITH: Well I think that's precisely what
you're asking me to do.
DIMBLEBY: What, to say rule out, say ruling
in or ruling out the possibility of tax increases is to ask you about a
manifesto?
SMITH: I've already given you a number of
examples of what are the adjustments to our taxation system that ought to
be the first priority. There's also a question of economic judgement in all
this as to whether imposing taxes on ordinary people at the stage of our
economy as at, which is to put it at its best, in a state of fragile recovery,
is the most sensible thing from the point of view of economic management and
I'm far from convinced that it would be sensible to do that because of the main
impediment to Britain's economic recovery is personal indebtedness, the
negative equity in housing, the fact that people owe so much money and of
course there is the fear of unemployment and the fear of VAT increases, these
are all negative factors in our economy at the moment and that has to be taken
into account in the judgement that people make as well.
DIMBLEBY: Now, let me ask you about your general
attitude to tax, on the assumption that the economy is moving in the direction
that were you in charge you would hope it would be going and you touched
on personal taxation in the recession, Gordon Brown said very specifically: no
increases in personal taxation. Now, in the context of a party that has been
seen, fairly or unfairly, as the tax and spend party was he making a general
statement of approach for the long term or was he merely referring to the
problem of the short term?
SMITH: Well, when you say tax and spend party
you're implying that somehow the Labour Party would be reckless taxers and
reckless spenders. That's the kind of code that lies behind that and that is
not true either historically or currently about the Labour Party. We are a
party of fair taxation. We need a fairer taxation system in this country and I
think for example the imposition of VAT in the way that is proposed is
thoroughly unfair, in that the burden is going to go on very needy people. As
far as spending is concerned....
DIMBLEBY: ... can I come to spending afterwards -
do you mind? Just on the tax question. You say fairer taxation. You've been
in the past unequivocal about this. The tax system as it is now is unfair, the
personal tax system and therefore you would expect higher paid individuals to
be prepared to pay more tax in order to redistribute. Is that still the
position of the Labour Party?
SMITH: Well, we're looking into the details of
our tax policy in order to get a fairer system and we have set up a social
justice commission which is looking into these matters very carefully at the
moment and we will be discussing them very fully indeed, but there is in
addition to that question about the fairness of tax, there is the use of
taxation at this particular stage in our economic cycle, given the fragility of
our recovery, and these are two questions that one's got to consider as well,
but as far as the longer term is concerned and our policy for the next
election, we will be considering how we get a fairer tax system with very great
care indeed between now and then, and announcing our policies when we've
reached our decisions.
DIMBLEBY: But in framing those policies or
examining those policies is your approach to them as it was indeed when we last
spoke which was just about a year ago when you then said, "There will have to
be some element of redistribution in any fair tax system. You say it's got to
be fair, do you still believe that there will have to be an element of
redistribution?
SMITH: I think in order to make it fairer there
will be elements of redistribution in it, yes, I think if you say it's unfair
and you've got to make it fair you do it by some element of redistribution of
the burden.
DIMBLEBY: That is the logic and that means the
higher paid having to pay more.
SMITH: Well, you've got to look at the whole
system and see how you're going to strike the balance of fairness and equity.
DIMBLEBY: But it does by definition, if it's going
to be fair, it has to be the better off yielding...
SMITH: Well I think you've got to look at the
whole scope of taxation and that is the opportunity that the wide ranging
review of which we're about gives us, and I think also you've to set it in the
context of your economic policy and your social policy as well.
DIMBLEBY: Let me, and I'll come in a moment to
social policy, but Neil Kinnock in an interview the other day gave an
intriguing insight into what he said you would now have had under way had you
been elected, which was to have what are called technically a hypothecated tax,
or at least a tax raised to finance health spending particularly. That's what
he said you would have had in place by cutting the basic rate to twelve p and
using thirteen p, all of it dedicated to health. Is that what you would have
been doing had you been Shadow Chancellor. Was that the game?
SMITH Well, I didn't advance these policies at
the time of the last election, nor did the Labour Party, but it's an idea ..
DIMBLEBY: So what's Neil on about then?
SMITH: Well, I don't know, you'll need to ask
him. I certainly didn't put forward that proposal at the last election, but I
certainly think that we should examine all possible changes to our system
because if we're going to make the thorough examination that we want to do in
the Social Justice commission which is not designed to save money so much as to
create a new system, a better system for the future, using our money more
wisely, then I think we should look at all these things and see whether there
are merit in any of these schemes.
DIMBLEBY: But if you are committed as you are to
the principle of some redistribution that would suggest that you can't be
enthusiastic about a shift from direct to indirect taxation as a proportion of
the total burden, because that is not progressive but regressive. It
redistributes hock to the better off.
SMITH: There's an argument about that, but I
think on balance it probably does redistribute in that sense, and that's of
course one of the reasons why the very steep increases in VAT focussing on
household heating costs which are a very large element in people on modest
incomes' budget is such a very bad thing.
DIMBLEBY: Now there will be people who say having
heard what you say about tax there, very interesting, he's been very
forthright in general terms about it, but it ain't new, that's the Labour Party
and we know and we love or we don't love.
SMITH: Well, I think the important thing is as
I think I've already said to you is to get the right policies. There's always
this tendency for people to say why don't you be newsmaking, why don't you
intrigue us more with your....... The important thing is to get the right
policies, the sensible ones for the country, because this let me remind you, as
far as I'm concerned and the Labour Party's concerned is not some academic
argument. These are policies that we want to carry through, these are policies
we want to carry through when we're elected as the government of this country,
and therefore I think we should think carefully about them,because I want to
see them work, I want to see them make the changes I want to see in our economy
and in our society.
DIMBLEBY: Let's then pick up on the spending
element of this. You say that you're unjustly described as the tax and spend
party as of course you would, but there is generally perceived, generally
described to be the big spender is the Labour Party. Now one way of countering
that, and I put it to you as a thought, maybe to take in some respects the same
attitude towards spending as President Clinton took when he said, "We have to
be very certain that we're not going to have a something for nothing attitude
towards the welfare spending". Is that your attitude and could we describe
that as part of the new politics of which you speak?
SMITH: Well, I think on spending there is the
question of the total which of course is very important in terms of
macro-economic management but there's also what you get back for your
spending. Now, spending on unemployment doesn't get you very much back is it,
therefore the important thing is to get people back to work so that we can take
the money we would have spent on unemployment benefit and use it for training,
use it for investing in our public services, use it for investing in our
economic infrastructure, so there's no case for spending for itself, it's what
you're spending on and I would like to focus our public spending programme on a
number of areas. Economic recovery, very very important that we strengthen our
economic potential and using our fiscal system to do that. Secondly, by
getting public services up to the standard they ought to be at this country.
Creating more opportunity for people in this country; creating a more socially
just society. These are the ways in which I would like to see public
expenditure shaped and that would be the way in which a Labour government will
operate putting money into strengthening our economy, putting money into giving
us a fairer and more socially just society; putting money into creating
opportunities for people because by the development of their skills and their
individual talents we will as a community eventually prosper and until that is
done we won't prosper.
DIMBLEBY: But Tony Blair uses this phrase and
plays around with it a lot of rights and responsibilities. If you are going to
be putting money into people's pockets, into... via welfare spending, do you
seek to exact from them responsibilities accordingly? And let me put a
suggestion to you. David Blunkett said there should be compulsory community
service, for instance, for people aged between sixteen and twenty-one, for nine
months or so. Is that the kind of thing that you mean by rights and
responsibilities?
SMITH: No, I'm personally not in favour of such
a proposal though David is quite happy that he should discuss these things but
I certainly don't support that.
Now people talk airily about the
responsibilities and the like. I think... let's take the health service for
example. The important thing is to create a health service, I don't think that
erodes anyone's sense of responsibility, the fact that we've got a good public
health service but of course, everyone does have a responsibility in society,
they've got responsibilities to be good parents, they've got responsibilities
to be good citizens and members of the community. All of these I think are
encouraged by good, strong services, by building a strong community based on
strong family life. These are the things that will give us a good society.
Now the trouble is and we're seeing it not just in this country but across the
western world, society is tending to come apart. Now I think the family is a
very important part of re-building our society but I think providing jobs for
people is a crucial part of that; providing good homes for them to bring up
their families; good public services; an excellent health service;
educational and training opportunities for the children, these are all the
things that I would like to see happen and we must take a positive attitude.
Let's take one of the contemporary arguments about single mothers. The most
important thing a single mother and her family or indeed, sometimes a double
parent family needs is job opportunity for them and their family and child care
that goes with it so that we create opportunties for people.
DIMBLEBY: And no special rights for single... to
pick up one of the issues of the hour, no special rights for single parents
over and above double parents?
SMITH: No, I don't want to pose these people in
opposites because there is no need and it's silly to do so. Look, when a
family is unemployed, husband and the wife unemployed and perhaps teenage
children out of work, they've as a big a problem as the lone parent has as
well, we don't pit these people one against the other, that's the politics of
creating discontent in society, of scaremongering. That is not a sensible way
to approach it, we need to help them all surely.
DIMBLEBY: Now given that and there is your pitch
as it were as Labour leader, in a phrase or so as you approach now the
Christchurch by-election. John Prescott has said somewhat accurately, if
perhaps overly honestly, there's precious little chance of you winning it, do
you want to maximise the bloody nose with your supporters voting Liberal or do
you want to maximise the Labour vote?
SMITH: I want people to vote Labour in the
Christchurch by-election. We are fighting to win it, we will fight it very
vigorously and we will spotlight on the issues that concern the people of
Christchurch as they do throughout the country, the VAT bills which they're
going to face which are a total betrayal of the Tory Party's election
promises. For that reason alone they should lose the by-election.
DIMBLEBY: And if the critics say, having heard you
this afternoon, he's a one last heave man, in a word, what's your answer?
SMITH: Well I believe that we've got to fight
very hard to win the next election but I think we're in a strong position to do
that. I'm far from complacent about it but I believe that if we can create
that strong economy, policies to create that, the just society and reform our
constitution, an area we haven't been able to touch, I believe we've a
very very strong programme of reform which will be the basis for an election
victory.
DIMBLEBY: John Smith, thank you very much for
talking to me this afternoon.
SMITH: Thank you.
...oooOooo...
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