Kenneth Clarke says he wouldn’t have stuck to the Tories’ spending plans for the first two years of this Parliament. Were we too dogged in doing that?
We had to sort out the debt and the borrowing we inherited. If you look back at the history of Labour governments, they started by spending lots of money in their first year or two. They made promises to do so and they, rightly, thought it was right to honour those promises. But at the end of that period, because they had over-spent or had a particular problem with inflation, they ended up having to retrench and cut back in the next two or three years. It was very difficult for them and, therefore, in some cases, they ended in disillusionment. I thought it was right that we make the disciplined decision to sort out the public finances first. You create the foundation from which you can build and then you’re able to invest in a sustainable way. I think that’s what we’ve managed to do. There is no government in the last century that has been able to do what we propose: substantially rising investment in health and education – five to six percent a year, every year, in real terms after inflation, for the next three years.
Every analysis shows you have been redistributing wealth from the richest to the poorest. Do you think we would have encountered less problems in Labour’s heartlands if the Government had been more explicit about this?
I don’t think that I could be more explicit in saying we want to abolish child poverty, just as we want to abolish pensioner poverty. I’ve said that our aim is that every child has the best possible start in life. So, we are ensuring, first of all, that more money goes to families and, of course, as I said in the Budget, we will do more for those who need most. We’ve raised the maximum level of child support, for example, from £28 to £51, a very big rise during the course of the Government. And we have taken 1.2 million children out of poverty. Because our aim is that every person has the best chance to realise their potential, because we recognise the damage that child poverty does, we have not only increased children’s benefits, we’ve got Sure Start for the under-4s, the new Children’s Fund, we’re expanding nursery education and putting more into schools. We are also getting more money to those people who work and the low paid because we want full employment and to make work pay. Therefore, we have the national minimum wage, the Working Families Tax Credit and we’ve got the employment credit coming. We’ve got a new approach to the tax system. In the past, the tax system took money from people. Now we are building a situation, with the tax credits for working families and people in employment, where the tax system can pay people money.
Now we have established our economic credibility, isn’t it time to look again at the issue of a higher rate of taxation on higher earners?
When we went into the last General Election, we made it absolutely clear that the rates of tax would not be raised, either the basic rate or the top rate. In fact, we went better than that: we cut the basic rate from 23p to 22p and we also introduced a 10p rate. I think it would be wrong of me to say anything about the next manifesto until it happens. But you can see what I said in the Budget. I said we want to reward work and make work pay and I think that we have.
We’re uprating the Pension Credit and the Minimum Income Guarantee in line with earnings. After last year’s Conference vote, isn’t it time to do the same with the basic state pension?
I think the best way forward is another way and I think increasingly people are coming to accept this. We started by trying to tackle pensioner poverty. We’ve raised the Minimum Income Guarantee from around £70 to £92 and it will rise to £100. And we are linking the pensions’ Minimum Income Guarantee to earnings. Then we have to look at how best we can ensure every pensioner can enjoy rising standards of living and share in the prosperity of the country. You could link the pension to earnings. But what will happen then is that, increasingly, as the income of pensioners rise, particularly newly retired pensioners, you would have more and more of your money going to those people who already have very substantial occupational pension provision. We calculated that seventeen percent of pensioner couples retiring in their early 60s have incomes now of about £20,000 a year. That will rise to 20 percent, 30 percent, 35 percent. The best way forward, therefore, is the Pension Credit. From 2003, this will go to pensioner couples who have incomes of £200 or less and to single pensioners. And it will rise in line with earnings. Tax allowances for pensioners will also rise in line with earnings. Now we have a situation where the poorest pensioners are being taken out of poverty and middle and lower-income pensioners are being rewarded for their savings and not penalised. Their standards of living are definitely going up in line with earnings. Those people who are the richest pensioners will get the basic pension, rising in line with inflation, but they are already provided for well in the occupational pension schemes.
Was it, in retrospect, a mistake to make the cut in lone parent benefit in 1997?
What we were doing was moving the benefits system from one based on family structure, in other words, an additional child benefit payment simply because you were a lone parent, to one based upon need, in other words, dependent on whether there were greater needs for your child or your family. I think it is unfair to discriminate against the children of lone parents, but it is wrong also to have a higher level of child benefit irrespective of what your family need is. But where the need is there we are prepared to make a difference. I think that is the best way forward. We now have a far better system of child support: child benefit for every family, the new Children’s Tax Credit and, where there is need, support can go as high as £51 a week. Indeed, in the Budget we showed that we’ve moved the level of maximum child support from £28 a week, when we came into power, to £51. I think our system is better and, despite all the difficulties and the way it was presented, I think we made the right decision.
Although people welcome the rise in the minimum wage, there’s still concern about the principle of having a separate, lower youth rate. Do we still need it?
As far as young people’s wages are concerned, we need there to be justice so that we avoid exploitation. But, equally, we need there to be no argument put forward by employers that they’re not going to hire young people because of the minimum wage. It’s important that the young get the chance for training and their first start in work. Now, you’ve got to get the balance right and the Low Pay Commission is looking at this matter again.
Scotland and Wales seem to be able to afford more generous forms of student financial support than England. Why is that?
I think the partnership approach is going to be the way forward. If you look at when I was at university, only ten percent of young people got to university. Our aim is to get 50 percent. Therefore, we need a new partnership which involves the government paying its share. Parents have contributed in the past and there’s an expectation that they pay a contribution. But also students themselves. I got a huge benefit out of having had a higher education. It increases my earning power and my ability to choose more options as far as employment is concerned. The question then is what is the most practical and the best way of funding the university tuition and grant system, given that each of these three groups have some part to play?
Would you be surprised if, by the time of the General Election after next, we hadn’t joined the Euro?
That’s not really the issue. The real issue is do we meet the economic tests? We’ve set five economic tests, which have got to be met if we can show to the people of Britain that there is a clear and unambiguous case for joining the Euro. So the issue is does the assessment lead to these tests being met? As Tony Blair has said, we will start that in the next Parliament. We are also putting forward, through Robin Cook, Tony Blair and other ministers, radical proposals for reforming the single market and making it work for people right across Europe. I believe we are showing that we can be right at the centre of Europe. As far as the Euro is concerned, I think we ought to be clear that we have set these five tests, they’re about the future of the economy – whether it is employment or investment. We will make the assessment early in the next Parliament and then make our recommendation.
Do we still really need to sell off air traffic control?
The air traffic control system needs hundreds of millions of pounds of investment over the next few years. There is a change taking place in the way air traffic control systems are operated anyway. There is going to have to be far greater coordination of air traffic control services across the world and across Europe. Therefore, you are going to need far more investment capital in air traffic control. What we have proposed is a public-private partnership. Public safety is taken into account in a far better way than under the old air traffic control system. I think we have proved to people that our safety measures are far better than they used to be. But, equally, there is scope for investment capital, which is urgently needed and is going to be provided at the level that we need through these joint relations between the public and private sectors.
Lots of party members are suspicious about the principles behind PFI. How do you justify it?
That it’s in the public interest that we mobilise the maximum amount of investment for the projects that we are undertaking. If you take transport, I think that it is clear that the scale of the funds that are needed for the investment required in transport makes it essential that, in some areas, there is a partnership between public and private sectors. The test is whether the public interest is being advanced. To argue that, in every case, it must always be public finance, and never private finance, is to ignore the fact that in almost all the projects, even under the old nationalised arrangements, private contractors would be brought in for the construction projects. What we want is a better relationship, where the value for money accrues to the government, the public interest is better protected and you don’t have a situation, which used to happen with all these big construction, where the construction company built the project, walked away, then huge maintenance bills came later and there was no responsibility on the part of the contractor to deliver.
Is that your objection to the bond system proposed by the Mayor of London to finance London Underground?
London Underground needs about £15 billion and it needs it over the next period of time. Then there may have to be another huge investment programme, perhaps as big as that. What London Underground needs is construction expenditure to build a modern and higher capacity system that people will, in great numbers, want to use. So, we’ve got to get more investment into it. The £15 billion is a very big sum of money. It seems to me that if you’re paying these construction companies to do the modernisation work anyway, it is far better to get a stronger relationship between the public and private sector, where we don’t have the over-runs that we had on the Jubilee Line, or the excessive costs we had on it, and we don’t have the private sector building, and then walking away, from a project. They should be bound by its success, or lack of success, into making sure they don’t leave huge maintenance problems behind.
How much influence does the party’s policy-making process have on the decisions that you personally take?
As we draw up the manifesto, and look at the programme for the next Parliament, it is to the policy forum for its conclusions and its debates that we look. We examine what has been achieved there and what has been proposed. In the old days, when I was first a Labour candidate, we used to go along to Labour Party Conference and say to ourselves that we were passing a resolution that would commit the next Labour Government. But the resolutions were usually a few paragraphs that didn’t add up to detailed policy. At the same time, there was always something that you would have chosen to have written more carefully. We’ve learned from that and I think the policy forum process allows people, even though they may have different views as they start a conversation or a discussion, to go into the detail as well as set broad principles. I think it has given a sense of engagement to far more party members than it was ever possible to have when we had the old research working parties without the policy forum engagement.
What are your priorities for the second term?
First, we’ve got to have a more productive economy that yields the prosperity so that we can get to full employment. Second, every child must be given the best opportunities in education. Third, we must take all the steps that are necessary to tackle child poverty. Fourth, investment in public services. We must ensure that we invest in health in a way that guarantees both a service that is based on the principles of the founders, and is sufficiently modern and reformed, so that people feel it is working in the best interests of this generation. Then I would add the tackling of international poverty. We started, with Clare Short leading the way, on the debt initiative. Our aim is that we meet the 2015 targets: that every child is in primary education; infant mortality is cut by two-thirds; and that we have a halving of poverty around the world. These are the five goals and I think we could get widespread public support for all of them.
Would you describe this as a ‘socialist’ government and, if so, why?
If you believe, as I do, that everybody should have the opportunity to realise their potential to the full, these are values that have been held by Christians throughout the centuries, radical reformers and by socialists. There is a need to help people bridge the gap between what they are and what they have it in themselves to become. In other words, to help people fulfil or realise the best in themselves. I believe that is right in the centre of what I was brought up to believe and, equally, what most people in the Labour Party believe in. We are part of a community: we have shared needs and common interests, we have linked destinies, but we have also got shared beliefs. The beliefs are that by the actions we take together, by our common endeavours, we can make it possible for people to make the most of themselves. So we’ve set these goals for the next ten years. We want full employment. We want every child to have the best possible start in life – so, to start, we will halve child poverty. We want a majority of people enjoying the benefits of higher education and not just the old minority that used to get there. And, of course, we want far better public services that we’ve invested in. These are goals that, I think, most decent-minded people in the country can subscribe to.
What is the achievement of the past four years that you are personally most proud of?
It is the Government working together to get more people into work, to tackle poverty, and to build an economic foundation that I think will, over time, mean a Britain where more people have more opportunities to realise their potential to the full. When we think about this historically, people will want to say that this new generation of Labour – with the same enduring values as the founders of the Labour Party, but a recognition that new times require new means to achieve these – was able to do more to increase people’s opportunities and to allow them a fairer, better chance to realise their potential. That is a continuing task. It is never something that you can say has been achieved. That’s why, whatever has been achieved in the first Parliament, it does not make us complacent. In a world where, sometimes, the press make people want to be cynical about politics, these are causes worth fighting for and goals that are worth striving for.