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ON THE RECORD
RECORDED FROM TRANSMISSION BBC-1 DATE: 19.11.95
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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...
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