................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 11.7.93 ................................................................................ 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...