................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 7.3.93 ................................................................................ JONATHAN DIMBLEBY: Good afternoon and welcome to On The Record. In today's programme: a little over a week from the Budget, the Chancellor is subject to much competing advice about what he should do to rescue Britain from recession. Today, facing his first Budget as Shadow Chancellor and in his major interview since he took up the post at the General Election, Gordon Brown goes on the record with his blueprint for recovery. The New Economics he calls it. But is it really so new? And would it really do the trick? Quote: "when it is prudent to do so, we will cut taxes". No, not the words of the Chancellor but of his Shadow, Gordon Brown unveiling his vision of Britain's economic future under a Labour Government. John Rentoul reports. ****** DIMBLEBY: Shadow Chancellor, you call this a new economic policy but apart from some rather trendy jargon, let me suggest to you that really all you're up to is edging just a little bit further towards the Tories. GORDON BROWN: No, quite the opposite. I don't think that your film report reflects what the new economics is. It's first of all, an analysis of what's gone wrong: the failure to invest in industry, in people and in our social and economic fabric and, therefore, that the problem of the British economy is one of capacity. It's new, secondly, because it recognises that we live in a global economy and if you can buy capital, raw materials and inventions round the world, as companies can, then what's going to make the difference to our national competitiveness is our skills and, therefore, investing in training and education is not peripheral - it is absolutely central to the success of modern economies. And it's new, thirdly, because it's applying Labour's enduring and fundamental values. Individual potential, realised in a strong and prosperous community, to the problems of the nineteen-nineties and, therefore, we break free from the old battles between State and market, between private and public sector, between capital and labour and we say that the job of the community is to mobilise our resources to advance individual opportunity and to invest in our future. Now it's not new revisionism, it's a new radicalism, based on our fundamental values and I don't, as I say, think your film report gave a fair reflection of what we're actually saying. DIMBLEBY: But you say that's all new. Forgive me, but the.. an analysis which talks about long-term decline because of failure to invest, the need to develop training and an end to the old divisions between public and private - that's all the stuff that was there before the election. BROWN: No. Let's look at it - start from a global economy, start from the fact that the technology-driven products and processes in which we're going to succeed in the future depend increasingly on investing in your skills. Then move on to say "how do you apply Labour's lasting principles to these problems?" and it is about economic modernisation through the advancement of individual opportunity. In other words, the public interest is not simply about public ownership, it's not simply about the Government financing this or that, it's boosting demand here or there - it's about the Government addressing fundamentally the problem of capacity in the economy, our productive potential and everybody from the Bank of England now to people on that broadcast was saying that the real problem of the British economy is the failure to use our capacity properly. Now, if you don't invest, you won't succeed, and if you don't invest in people, you won't succeed, and this Government (as well as some people on that film) misunderstand the problem. DIMBLEBY: Some of the people on the film being one of your colleagues in the Shadow Cabinet, amongst others. BROWN: Well, some people on the film being your reporter who didn't seem to get to grips with the new economics. DIMBLEBY: Well, we'll see. BROWN: We're talking about basic values that we're applying to new problems in a new age. Individual potential being the essence of what modern Socialism is about. The use of the power of the community being the central means by which you organise your economy and the problem that's got to be addressed - the explanation of our long-term decline
is a failure to invest. The Conservatives can't do that because they eschew the role of Government - we are prepared to use the power of the community for the good of everyone. DIMBLEBY: In some, is Gordon Brown brand new or is he John Smith, Mark Two? BROWN: Well, John Smith and I agree entirely with the views that have been put across here, but we're applying our philisophy to a new age. We recognise that we've had an environmental revolution, that there's a technological change taking place, there's a communications revolution. You can't - like Bryan Gould implies - somehow retreat into one country. We're operating in an international market place where we will succeed by investing in our industries and in our people. DIMBLEBY: OK. Are you, as a result, saying that you are now more enthusiastic about the market than Labour was before the Election? BROWN: Well, I recognise that the market does very useful things. I also recognise that there are failings in the market that have got to be addressed by Government. In other words,... DIMBLEBY: Are you more enthusiastic? I know you've got.. obviously the market's got to do certain things. We all know that. Are you MORE enthusiastic, are you more, sort of, willing to embrace it
than Labour was previously? BROWN: Insofar as I recognise that it's important to extend competition in particular areas, such as banking and financial services, I think that is a new appreciation of what Labour is saying about what is in the public interest. But insofar as I also recognise in the field say, of banking, or utilities, that you've got to have proper standards set in the public interest, then I'm saying that the market is part of the public interest but doesn't equate with the public interest. The Government HAS to intervene, but it's got to intervene in the right ways and not the wrong ways. DIMBLEBY: Now this is where there's an interesting overlap. You say Government's got to intervene in the right way, then you use this very familiar - I called it a jargon term - "community and empowerment". What's the difference between the community saying that the market has to operate in the public interest, as you say, and saying the State's got to intervene to ensure that the market does? BROWN: Because you start from the idea of public interest and you don't necessarily assume that that means that central Government has got to do this or dictate that. There are certain circumstances in which the community can organise its own affairs. There are certain circumstances in which the public interest means merely an enabling role for Government. There are other circumstances, like in the Health Service, where it means that the Government must OWN the facilities, otherwise this monopoly is left to private individuals. DIMBLEBY: When you say the community enforces the public interest and defines the public interest. Aside from the fact that people say we want this or we want that, what's the difference between the community. What is this...they're wonderful phrases community and empowerment, aren't they? They sound good but I wonder really whether there's anything behind the phrase? BROWN: Well, let's start from the basic philosophy. The basic philosophy is this, that individuals should be in a position to realise their potential to the full. They should be able to bridge the gap between what they are and what they have it in themselves to become and that is a very broad view about the empowerment of the individual in a community. In other words, government's job is always to look at how you can advance the interests of the individual but the distinctive socialist message is that happens best when the community acts on behalf of the individual. Now by community, I don't mean geographical communities necessarily, I mean recognising the inter-dependence of us all. But when you establish that there's a public interest at stake then there is a job for the community or for government to do but it doesn't necessarily mean and this is where people misunderstand the position, it doesn't necessarily mean government must own everything but what it does mean is that there is a public interest which requires the government to act either by setting standards or rules or acting as a partner with private industry. A financier in some cases, an enabler of public interest that is advanced in a fairly flexible way in the modern world. DIMBLEBY: Well, given that it doesn't mean that the government must own all, given that you say it's not now the question of public versus private. It would probably help people, I put it to you, who aren't altogether clear about what you're on about - although they might well be clearer as a result of what you're saying now - to say not only is Clause Four irrelevant as John Smith seems to believe it is but to make it clear to the public that we know what we're on about, we're jettisoning that clause about nationalising the means of production. BROWN: Well, I've already set out what my views are about the empowerment of the individual by the community and that, of course, you use public and private sector means to achieve that and so that
it's not unclear, that means not just..if you like, social opportunity, a health service provided by the community to enable individuals to be free of ill health. It also means economic opportunity. But as far as Clause... DIMBLEBY: But why not junk Clause Four? BROWN: Well, as far as Clause Four is concerned John Smith's made it absolutely clear that he's not going to spend his time looking back to 1918 and going back into the past and into theory and ideology, he's got a more important thing to do, as I have and that is to write the new economic policy for the future. DIMBLEBY: But it would be quite sensible wouldn't it, to do it on the base of saying that's part of yesterday not part of tomorrow, or is it that it causes such a furore in a party which people are still suspicious about, you don't quite dare do that? BROWN: No, I don't think so, I think you can have a very interesting debate Jonathan about you know why Sydney Webb did this in 1918 and what brought about this specific wording. DIMBLEBY: Do you think it will go? BROWN: Well, it may go over a period of time... DIMBLEBY: Would you like to see it go yourself? BROWN: Well my view is that there's no need for us to spend our time looking at this at the moment. DIMBLEBY: But that's a different kind of question, would you like to see it go? BROWN: Well my view is very clear, that I've set out my philosphy is. John Smith's made it clear that he's not going to spend his time doing that. DIMBLEBY: Meanwhile, we have the problems that immediately face the country because what you've been describing there is a strategy for the long term and the kind of changes you would introduce. There's a budget coming up. What's going to make Gordon Brown not sound like a me-too shadow Chancellor when he responds to that budget? BROWN: Well, I think the important thing is building the capacity of the economy by getting people back to work. If my theory is right, then it is the failure to use the skills and mobilise the energies of people that's the root cause of our national economic decline. So you've got to have a budget that does two things. One: get people back to work and secondly, build the productive capacity of economy. Now I have sensed over these few weeks that redundancies are continuing, indeed, rising at a faster rate than at any point during the recession and I now believe that we don't just need the public sector initiatives that I've talked about in the past but we also need the government to take measures to encourage private industry to take more people more on. In other words, to get people back to work. I think first of all there should be a small business grant scheme and that would enable firms to take people on and to invest in their future. And I believe secondly, that we should relieve employers of National Insurance burdens if they're going to take people from the long term unemployed register within a short period of time and get people back to work. Now I'm going to finance that by closing a number of tax loopholes that I've identified in these last few weeks where the Chancellor will simply not act because of vested interest. So these programmes that I'm proposing are absolutely essential to back the public sector initiatives that I've proposed to get thousands of people back to work but at the same time I'm going to finance them from the current expenditure I would raise from closing tax loopholes. DIMBLEBY: The going, I have to say, however disappointing it might be to you in brackets is, were I to be Chancellor. BROWN: I think it would be better if I was,
given that he's not likely to do very much. DIMBLEBY: You wouldn't be sitting here if you didn't think that. You said... just to pick up on detail now because it's interesting, you haven't said this before. When you say grants to private... small businesses, you're talking about grants directly from government? BROWN: Exactly. DIMBLEBY: What kind of money have you got in mind? BROWN: We've got to go beyond the investment incentives of the autumn statement which haven't done enough to get industry moving. DIMBLEBY: And what sort of money are you thinking of? BROWN: Well, we're talking about substantial sums of money. A small business grant scheme, perhaps for the engineering industry principally, that will allow them to invest in the future, take workers on and get people back to work. You see what people fear is that we've a government that will continue to talk about cosmetic initiatives on unemployment, but will actually not get people back to work. I've now proposed a range of public sector initiatives which have been costed and which can be carried out. I now propose a range of private sector initiatives which can also be taken. All of these can be financed within the changes in the tax system that I've recommended and the reason, of course, we're not having action from this Government is not the absence of resources, it's the absence of political will. DIMBLEBY: Now, let's just on that other point. You say that all employers, you believe, who take on from the long-term unemployed should not pay any employers' NIC - that's the other proposal. BROWN: Well, I think that's what we should look at. Over a period... DIMBLEBY: LOOK AT.......a proposal - just now you said you were going to DO it. BROWN: Well, of course, it's the Chancellor that's got to look at it. DIMBLEBY: But he ought to be doing it. BROWN: Yes, I'm proposing it to him, and what we should do in that period, if someone is taken on within the next three months, then for the period of the year, up to a certain amount, the Government should relieve the employer of National Insurance Employers' Contribution to enable more people to be taken on quickly, and now that allied to the small business scheme that I'm proposing is a very substantial private sector initiative and that's got to go beside the public sector initiatives, the work experience, the community programme initiatives, the environmental improvement initiatives, that add up to probably the most ambitious programme to get people back to work that we've seen. DIMBLEBY: Now, you say they could be financed out of closing tax loopholes. Does that mean that as you are assumed to believe, you don't believe there should be any more borrowing, that the Chancellor should not announce an increase in the PSBR? BROWN: I don't believe that there should be additional borrowing for consumption, but I do believe that there is a case for borrowing where investment is involved and I think your film reporter misunderstood what I've been saying all along on this. Where you can justify increased borrowing for investment purposes, just like any company, that is something that the Government should do, and I've already suggested a private-
public task force to look at infrastructure and other projects that could be brought into being quickly, both to get people back to work and to do something that is useful for the economy. So I am prepared to contemplate that and, of course, I have proposed the release of capital receipts to enable the construction industry to build houses. DIMBLEBY: So just to get it straight. Given what you've just said, if you were Chancellor you would be going into the House of Commons and you WOULD be announcing a higher PSBR? BROWN: I would be prepared to contemplate that but, of course, the measures that I take are likely to bring the PSBR down. Every one per cent of growth would reduce the PSBR by something in the order of two to three billion pounds and, of course, by reducing unemployment - which is the aim of my policy - you're going to get public borrowing down. DIMBLEBY: So this is Keynes again isn't it? This is Keynes - stimulate now, stimulate now, don't worry about the borrowing deficit, because one day you've be able to pay it off. BROWN: No, no, it's quite the opposite. It's saying what you do in the short-term - and this is what has got to be recognised - what you do in the short-term has got to have long-term benefit for the economy. You see, we're in an international economy. If you expand demand without any attention to supply, then you could run into major problems. But, at the same time, if you target your investment for long-term benefit then, of course, you can both get people back to work and add to the productive capacity of the economy. You've got always to get back to this central point that the problem of the British economy is a problem of productive potential, the failure to invest over a long period of time. DIMBLEBY: But in the Budget - more borrowing. You also talked about your tax proposals. I want to come on to the broader view that you have about tax in just a second, but just while we're still on the Budget. In the immediate predicament there's this great debate "should taxes go up, should they go down, should they stay overall where they are?". Would you, if you were Chancellor now, be saying there is a case for tax cuts, or would you be saying under no circumstances. In fact, rather the contrary, given that I'm going to boost borrowing a little. BROWN: Well, I think at this particular point in time to raise income tax or National Insurance or VAT would be a mistake. It would probably take demand out of the economy. At the same time, I don't think there's a case for lowering taxes at this stage. I think the important thing, however, to recognise is that anything that the Chancellor should do should not just be of short-term value, it's got to increase the long-term productive potential of the economy. DIMBLEBY: Let us then look at an intriguing phrase you had in that speech. It's the kind of phrase that some of us wonders whether Shadow Chancellors wish they hadn't quite made. But I'm sure you.. BROWN: I don't regret any word of that speech. DIMBLEBY: I bet you don't. Ok, you said - I'm summarising but you won't disagree with my summary - if we can cut tax when it is prudent to do so, we will. Really? BROWN: Well, of course, that should be a realistic aim and objective of a Labour Chancellor. If we can achieve the growth levels that we want, if we can deal with the problems of the public services that we have then it should be part of our objectives where possible to cut taxation. Now I've already indicated a number of means by which you can actually do that, I've actually suggested a tax relief for training, so that we can invest in skills. So my intentions are pretty clear but, of course, you've got to have the growth and you've got to improve your public services. DIMBLEBY: But does it mean that there are circumstances you can imagine, in broad terms - I'm not asking you to say tomorrow, the next week or whatever - where you could, given a choice, because there's always a choice, you could say, it is in the interests of the British economy to cut taxes rather than to increase spending? BROWN: Well, there may be circumstances when you've dealt with the problems of the public services where you can do that. What I'm saying is it should never be assumed that the Labour Party wants to tax for its own sake. This was a perception that grew, a wrong perception that grew around our policies .... DIMBLEBY: An understandable perception, you will grant. BROWN: No, I don't believe that's the case at all. DIMBLEBY: Come on. BROWN: Under John Smith's proposals eight out of ten people were going to be better off. But we don't tax for its own sake, we are not against wealth, what we're against is poverty and the unfair waste of individual potential. DIMBLEBY: OK, if you're holding out this long term prospect of possible tax cuts. Are you saying that you are referring to possible tax cuts for the..one day, for the ordinary standard tax payer? BROWN: Well these are matters that are, of course, considered by our social justice commission at the moment and I think it would be premature for me to announce Labour's tax policy for the next election. DIMBLEBY: You haven't backed off so far, why are you backing off now, you know what you're saying. BROWN: What I'm doing Jonathan, is setting down the basic principles that we will pursue. We tax for specific purposes, to advance individual potential and opportunity and to improve the services available to the community. If it's prudent to do so, we would cut taxation but, of course, we recognise that the services that we've got to meet in our community have been under funded and under financed over a long period of time and it's the duty of government to improve these. DIMBLEBY: Do you no longer, you've said that under present circumstances taxes shouldn't go up, do you build into that now that the... those who are paying at the higher rates of tax should not be looked to to pay more in order to re-distribute elsewhere? BROWN: No, I didn't say that. These are matters that have got to be looked at over a period of time, it would be premature for me to give my Budget judgement. After all, you're not going to get the Chancellor's Budget judgement and it's only eight days away. These are matters that have got to be looked at but, of course, if we tax the progressive principle there's got to be fairness. Those to can afford to pay, they should pay, those who can't, shouldn't, has got to be applied and I retreat in no way from that progressive principle. DIMBLEBY: You see maybe people draw the conclusion from that is it sounds rather exciting, this is a party that doesn't tax just for the fun of it but there's an awful lot of spending that has to be done, so it's not going to be in the short term A, and B maybe he's just on about indirect taxes and not direct taxes and that direct taxes will continue to bear down progressively in the way that you've hitherto proposed? BROWN: Well, Jonathan, I've already set out the principles that we will apply. I've set out the principles we'll apply to public spending as well. But, of course, the central problem that we've got to address is building the productive potential of the economy and it's out of that growth that we're going to be able to fund the improvements in public services that I want to see. But I don't hesitate from changes that would have to be made if they can be made. DIMBLEBY: You see, the pitch there, if I can put it like that, behind obviously a serious policy, the pitch has to be to those people who didn't vote for you last time. I suggest to you that everything you've said to me, interesting as it is, is effectively, a nod and a wink to the people of Basildon and elsewhere, which says I am really a paler shade blue although I sound pretty radical. BROWN: Not at all, these are fundamental changes that we're proposing in economic policy. The Conservatives have failed in their entirety. We are producing a new analysis of economic decline. We're producing a new method by which we will tackle that and it draws new conclusions and I think the people of Basildon will be interested in a party that has done this fundamental thinking, has come up with new proposals and new policies and a new sense of direction and hope for this country. Not just in the short term by tackling unemployment but in the long term by addressing these fundamental problems of economic decline. DIMBLEBY: Gordon Brown, Shadow Chancellor, thanks very much. BROWN: Thank you. ...oooOooo...