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ON THE RECORD
RECORDED FROM TRANSMISSION BBC-1 DATE: 28.1.96
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JOHN HUMPHRYS: Well Mr Smith, you've been told to think
the unthinkable - why?
CHRIS SMITH MP: I think we need to take a long and hard
look at whether the Welfare State, as it has now emerged, after fifty years or
so of actually being there for us. Whether it's emerged as something that
really meets the needs of everyone who requires its assistance and that basic
question, not abandoning any commitment to social justice, the party remains
very clear about that, but to see whether it is appropriate in every drop and
tittle to the modern world and modern circumstances.
HUMPHRYS: Are you going to reinstate the benefit
cuts that have been made under the Conservative Government?
SMITH: There have been so many cuts made by
this government and it would be so expensive simply to go back to where we
started, that we have to look, when we come into government, at what the
country can afford. That may well mean that we can't, immediately, put right
everything that's gone wrong but we want to make a start and we want to look at
some of the very key areas, like pensions and like the fate of the long-term
unemployed, where we really do need, I think, to make some immediate changes.
HUMPHRYS: What might you reinstate then, you said
you won't reinstate everything, that implies that you might reinstate
some things.
SMITH: Well I think we should get away from
simply thinking that reinstatement of what was there before is necessarily
going to be the best option. It may well be that we can do better than what
was there before and it's taking a long and hard look at some of those
questions that I'm engaged in at the moment.
HUMPHRYS: Right, so you're not going to turn the
clock back to pre-Thatcher days or even pre-Major days?
SMITH: Well we need to hold very fast I think
to two basic principles that have been there right the way since Beveridge,
which this government has been eroding and those two principles are that the
Welfare State is based really on two things. One is a recognition that all of
us as a community, as a society, have a responsibility to help those amongst us
who can't afford to support themselves, but secondly, that we also as
individuals have a responsibility when times are good, when we're earning
money, to save for those times, in retirement or illness or unemployment, when
things are not going to go so well for us. So it's a combination of that
insurance principle that relies on individual responsibility, but also that
recognises that there's a community responsibility as well.
HUMPHRYS: Right, so people have to take more
responsibility for themselves, that's what you are saying.
SMITH: That was a very basic Beveridge
principle, the insurance principle that he set out was very clear, that...for
those of us who are earning money, we should be putting money aside and saving
for times when they're not going to be so good for us.
HUMPHRYS: Right, so in that sense you do want to
go back to Beveridge.
SMITH: I do indeed want to go back to Beveridge
because those two fundamental principles that were in the Beveridge Report,
which really got eroded over the course of the last twenty years or so, I think
we need to recapture and reform the Welfare State into something that's new.
I'd say one other thing, and that is that when Beveridge produced his report,
we were in a situation when we had virtually full employment, when people
tended to work for one employer right the way through the course of their
working life, when a lot of women were not in the workforce and it was a much
simpler society in terms of the ability to create a Welfare State. Now it's
much more complicated, people go in and out of work, they work for different
employers. A lot more women in the workforce, we need to think about their
needs as well.
HUMPHRYS: And the other thing that's changed is
that we now have a Labour leadership that says "we're not prepared to push up
taxes to pay for all the demands of the Welfare State".
SMITH: What we have is a party that recognises
that when you are talking about expenditure of ninety-two billion pounds, which
is this coming year's expenditure for the Department of Social Security, a
third of all government expenditure, you do have a responsibility as a
government to look at that expediture and say "is it meeting the needs, is it
being effective in the way in which that very large amount of money, from
taxpayers is being deployed".
HUMPHRYS: So it isn't just meeting the needs, and
the changing needs as you describe them, but you're saying it's costing too
much money.
SMITH: It's meeting needs and making sure that
the money we are spending is actually effectively and efficiently meeting those
needs. Those are the questions that we need to ask.
HUMPHRYS: Which is what everybody always says of
course. Every government always says that - you've got to spend the money,
where it's going to be most effective and so on. But what you're saying quite
clearly, is that there is a point beyond which we cannot keep paying for this
because we can't afford it and therefore people must take more responsibility
for themselves.
SMITH: We need always to have in our mind what
the country can afford and although I have to say that as a percentage of our
overall national wealth we actually spend less as a country on our Social
Security system than most of the other advanced industrial countries. So let's
not get the ....
HUMPHRYS: Yeah but you don't want to spend more,
you're not saying because we spend less we ought to arrive at their figures.
SMITH: I would dearly like to be able to reduce
that ninety-two billion pound budget but I don't want to do it by harming
people who are in need and depend on the Welfare State.
HUMPHRYS: Let's look at ways you might do that,
you might do it by, you saw the problems that Emma, the young mother on that
film, the young lone mother was in, you could help her to get back into work
and help yourself in the process because she would then come off your bill
wouldn't she.
SMITH: You have just encapsulated what is going
to be one of the fundamental things of our reveiw of the Welfare State because
one of the key things is to make sure that we see the Welfare State as a
process that helps to bring people off benefit, out of dependency and into the
workforce.
HUMPHRYS: So how are you going to do it, how are
you going to get Emma back into work?
SMITH: Well at the moment, what the system does
too often is to trap people into dependency.
HUMPHRYS: You explained that very clearly, yes.
SMITH: It puts obstacles in the way of getting
into the workforce, so we are looking at a whole range of ways in which we can
make it easier to make that transition.
HUMPHRYS: Right, so you saw Emma's problem, she
can't go out to work because she can't leave the baby at home by herself, she
can't afford a childminder and so on, would you pay for Emma's childminder?
SMITH: Well, what we want to look at for a
start is making sure that child care facilities are much more readily available
than they are at the moment in this country. But what we are also looking at
is something like I saw in Australia just a couple of weeks ago, which is
called the Jet Programme and it's specifically focused on the needs of single
parents and it provides an intensive range of guidance and counselling and
advice and help with childcare, with learning, with training, with job
opportunities, very strongly focused on the needs of the individual single
parent.
HUMPHRYS: And if you don't sign up to that, if you
don't do what is then required, that is get a job, or get the training, there
is a penalty built in.
SMITH: It's entirely voluntary and the
overwhelming majority of single parents in Australia have opted to take the
opportunities that are given because most single parents want to get out to
work.
HUMPHRYS: Right.
SMITH: It's the obstacles that they face.
It's not malingering that means they don't want to get into the workforce.
HUMPHRYS: Right. Well in that case, if there is
no compulsion at the end of it, you can't absolutely guarantee that they're
going to get a job, then, it's going to cost money. Now, where is that money
going to come from, given that you've already said you're not going to add to
the cost of the Welfare State. Where is this money going to come from?
SMITH: Well, the interesting thing about the
Jet Programme in Australia is that it is now paying for itself.
HUMPHRYS: Yeah, eventually, that will happen but
in the meantime, you've got to build up to that.
SMITH: Because what happens is that you take
people off the Benefit Bill, you get them into the workforce, paying Tax.
They're less of a drain on the Social Security budget and as a result some
entirely positive outcomes.
HUMPHRYS: Right.
SMITH: So, I want to see if we can put that
principle to work on our Social Security budget and help not just for single
parents but for people who are trapped in unemployment at the moment.
HUMPHRYS: Right, so there's got to be investment
up at the front for the payback later on - some years later.
SMITH: Well, that is of course precisely what
Gordon Brown was talking about.
HUMPHRYS: Ah, yes, but that's only going to
cover...his scheme is only going to cover one particular group of youngsters.
SMITH: Yeah, well.
HUMPHRYS: You can't spend that money sixty-three
different ways.
SMITH: Let's look, just for a moment, at what
he was proposing and that was to use the money that he intends to raise.
HUMPHRYS: The Windfall Tax.
SMITH: From the Windfall Tax on utilities, to
use that as a specifically directed set of programmes for people who are under
twenty-five and who are in the longterm unemployed bracket. And, there are a
series of imaginative proposals that he came up with for that. Now, that's a
very useful way of saying: let's take money which is only a one-off tax revenue
and let's use that to kick start the process. And then gradually, as those
people come off the unemployment bill, money starts to flow back into the
Exchequer.
HUMPHRYS: I understand that but as you say that
is limited....
SMITH: Now, let's apply that principle
elsewhere...but in the Benefits system.
HUMPHRYS: But you...there aren't...there isn't an
infinite number of one-off taxes of that kind that you can tap into. So, the
money has to be found from somewhere else for all those different schemes - the
Jet scheme that you describe now. I mean we don't have a Jet scheme. Gordon
Brown hasn't said that that money is going to pay for a Jet scheme. For
instance, it's going to pay for something else. So, where is this money going
to come from. Why not, for instance, and this has been talked about - the
Cabinet are looking at it - taxing Child Benefit. Is that a runner, as far as
you're concerned?
SMITH: Well, I'll come onto Child Benefit, in
just a moment. But the basic answer to your question is that I'm looking at a
whole range of possible solutions to the Welfare to Work problem, I'm sitting
down, I'm making sure that every single one of them is very carefully costed.
So, that we know exactly what the expenditure is likely to be and where the
money is going to come from. In a month or two's time, I hope that I'll be
able to come forward with a very specific set of proposals on that.
HUMPHRYS: And if you could overcome the
practical problems, you would do it. Is that what you're saying?
SMITH: Oh, absolutely, because getting people
off benefit and into work must be the key to any sensible reform of the Welfare
State. At the moment, too often we tend to think of the Welfare State and the
Social Security system as simply a matter of paying money to people to have an
existing condition and to stay there. I want to see it in terms of the
outcomes; the throughput. How people can achieve to get out of benefit and
into work. It becomes a hand-up, not just a handout.
HUMPHRYS: Indeed. So, the principle that
underlines this is investment upfront. Government money - our money if you
like - upfront, to pay for something that is going to be of benefit to us you
believe in years from now.
SMITH: The whole point about a Welfare to work
strategy is that within two or three years, you actually start saving money to
very considerable extent on the Social Security budget.
HUMPHRYS: Once you've made that investment.
SMITH: Because you get people out of the trap
of benefit and into work and what we're looking at, at the moment, is how it
would be possible to afford and to pay for any initial costs that such a scheme
would incur.
HUMPHRYS: And Child Benefit is one way of dealing
with that.
SMITH: Child Benefit is not necessarily one way
of paying for that. I'm passionately committed to the universal payment of
Child Benefit because it does get to everyone who needs it. So, I don't want
to damage the universal payment aspect of it. Now, the Social Justice
Commission propose that for higher rate taxpayers, the people right up at the
top of the income scale, that it would be sensible to consider taxing them.
HUMPHRYS: Right, right. Given practical problems,
that's what you mean.
SMITH: I'm looking at that but there are
enormous practical problems and the principle of independent taxation is one of
them.
HUMPHRYS: Right, of course but if you can get over
that, then you're interested in that.....
SMITH: That I don't want to damage.
HUMPHRYS: But, if you can get over that, you're
interested in that idea.
SMITH: I'm certainly looking at the issue of
whether Child Benefit in its full entirety is needed by people right up at the
top of the income scale.
HUMPHRYS: Talk about pensions, we have a basic
State Pension, we have SERPS, after a fashion. You want to change that - why?
SMITH: I want to change that because what this
Government has done to SERPS over the course of the last seven or eight years
demonstrates how fragile it is. How it doesn't give real security to people
because SERPS is based on what is known in the jargon of the trade as a
pay-as-you-go system. It means that for today's generation who are in SERPS
when they become retired, their pension will be paid by the workers at that
time. So, it's not a funded scheme. It's not something where you build up a
pot for yourself-
HUMPHRYS: Not the sort of thing they have in
Singapore.
SMITH: -over a period of time. Now, the
problem with that is that any government - and, we've seen it in very real
problems from this government - any government can come along and can say:
right, we're going to cut the benefits. This government have cut by more than
half the benefits that people in SERPS were expecting ten years ago. Now, that
doesn't give people real security for their retirement for their old age and I
want to see if we can come up with someting better.
HUMPHRYS: Like what?
SMITH: Well, what I'm looking at is whether a
funded scheme, where people build up their own pot, for their own retirement,
with assistance from the Government and from the employer. When people can
build up their own pot, over a period of time, I think, that might well lead to
a better solution.
HUMPHRYS: That would have to be compulsory,
wouldn't it?
SMITH: It wouldn't necessarily because, of
course, we have compulsion in the system, at the moment. You either have to be
in SERPS or you're contracted out and you can only contract out if you have an
approved personal pension or an occupation..
HUMPHRYS: But, if it weren't compulsory, then,
the people who aren't, at the moment, investing in their own pensions, there's
no reasons why they should do it, is there? I mean, you'd have to have a wee
bit of compulsion there somewhere along the line.
SMITH: At the moment, for anyone who is
employed, there is compulsion, you have to be in a second-tiered pension
scheme. Something extra, above the basic State pension. Now, what I want to
do is look at that existing level of compulsion and not add to it. Not say
that people need to spend more. Can it be put into better forms of saving
which will provide a more decent return for them?
HUMPHRYS: What about the unemployed? Those who
some people might feel could get work but aren't actively looking for work.
What would you do about them under that sort of scheme?
SMITH: Well, of course, what Frank Field has
suggested and he spelt it out in your film - is that there should be some
process of crediting in to their second tier pension of people in those sort of
circumstances.
HUMPHRYS: Like that idea?
SMITH: Now, it's a nice idea, if it can be
afforded. And that big question of can we afford that sort of system is one of
the things that I'm looking at, at the moment.
HUMPHRYS: So, if you could afford it, then, that's
the road you'd like to go down?
SMITH: It would, certainly, be good to be able
to help people who are on low incomes or who have periods of unemployment, in a
way that they're not helped, at the moment. But, I need to make sure that that
is affordable within existing levels of public expenditure before I could even
begin to endorse that, in practical terms.
HUMPHRYS: Because the so-called transition costs,
before the new scheme is up and running and doing what it's meant to do would
be pretty high, wouldn't it?
SMITH: Well, that's a further issue that we're
looking at in some detail because, of course, how you switch from a
pay-as-you-go scheme into a funded scheme is, actually, one of the big
dilemmas.
HUMPHRYS: How are you going to square all the
sorts of changes that you've been talking about today with MPs like Alan
Simpson, who say - he said it on that film - don't muck about with the Welfare
State. The really unthinkable thinking, the really unthinkable would be to
leave the Welfare State..is to fund it properly.
SMITH: Well, I want to have a Welfare State
that meets the needs of a modern workforce, in a modern society, that helps
people to get off Benefit and into work; that provides real security for
retirement and doesn't leave everything open to the vagaries of - heaven help
us - future Conservative governments coming along and making further cuts. I
want to have something that provides real security, getting people out of
dependency and into security. That's what the Welfare State ought to be
doing. Now, I'm not abandoning any fundamental principles. I want to see a
Welfare State in exactly the same way that Beveridge and Attlee wanted to see
it but I think we can do a lot better than after seventeen years of
Conservative government we're doing at the moment.
HUMPHRYS: Chris Smith, thank you very much,
indeed.
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