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DERMOT MURNAGHAN: On Wednesday the Chancellor George Osborne will unveil his first budget since the election and it will be the first Conservative only budget for nearly two decades, they had been in coalition of course for the last five years.  I am joined now by the Shadow Chancellor, Chris Leslie, a very good morning to you Mr Leslie.  Now we would not expect the Labour party, given its state at the moment and also given the fact that the budget hasn’t been delivered, to have a full response to the budget, as I say it hasn’t yet been delivered but the aspiration as George Osborne has been saying for a long time now and has been writing about, is to achieve a low welfare, low tax, higher wage economy.  You’ve got to agree with that.

CHRIS LESLIE: Well everybody agrees with trying to tackle the deficit and getting the welfare costs down, the problem is of course it should have been eliminated by now, it’s still £75 billion and actually welfare is a lot higher than he was expecting it to be.  The question is, what do you do about that?  I think if he makes the wrong choices it ends up costing more in the longer run and we’re all going to pay the price for that.  There are ways of dealing with high social security costs but they are about dealing with low pay, making sure you address higher housing costs, tackling insecurity of employment – those are the big ticket items.  He has talked about a few things in the Sunday papers today around the edges but the things that would make a difference I’ve not yet seen from him.  

DM: Well the issue of tax credits isn’t around the margins is it?  It’s about a structural thing that has developed.  Tax credits of course invented and introduced by Gordon Brown and it gives the Labour party something to think about doesn’t it because the distortion it then creates at the lower end of the wage scale and there was no incentive from employers to pay higher wages if the state will subsidise them.  

CHRIS LESLIE: Well there’s a couple of things there.  If we can finally persuade George Osborne to U-turn and back some incentives for a living wage, that I think would be very welcome but ultimately don’t underestimate how important some of these tax credits have been not just in helping people to be able to afford to go to work, all those travel costs, child care costs and so forth, but also there is an important principle about helping the very most vulnerable in society.  We saw this week child poverty progress in reducing that stalled, in fact it should always set the alarm bells ringing when the Conservatives are trying to raise even the measures, the statistics about child poverty, it suggests that something might happen on that but they don’t want anybody to know about it.  

DM: We are also told some things might happen at the higher end, the top end of the income scale which presumably you can oppose outright, right now, which is the increase in the inheritance tax threshold if your home is included, up to a million pounds.  Presumably that is something that Labour wouldn’t consider.

CHRIS LESLIE: Again we have to look at exactly the details.  It was in their manifesto and they obviously won the election so these things are going to happen.  Their proposal I think is not going to affect 90% of the estate that people have and don’t forget, a lot of people end up having their estate used for their social care costs in old age so I am not sure very many people are going to be affected by it.  It’s not the sort of priority we would have, for me one of my big challenges for the budget is what’s he going to do for people on middle and lower incomes?  That has to be where all the efforts go in my view.

DM: Okay, so therefore into that philosophy, that analysis, what about a cut in the higher rate of tax, the 45p rate?  Now it was Labour policy to put it up to 50p if you’d won the election, you didn’t but are you happy with the 45p rate now?  That’s where it should stay?  

CHRIS LESLIE: I think this is again going to be an interesting test of the Chancellor’s priorities.  He has got a lot of former Chancellors, right wingers on the back benches, who he wants to impress for his future Prime Ministerial bid, his eyes are on his own ambitions but I think at a time when he is going to be hurting some of the people we need to support into work, it wouldn’t be right to cut that 45p rate on earnings of £150,000, I don’t think that would be right.    

DM: Okay, but has the 50p aspiration gone from Labour?  

CHRIS LESLIE:  That issue has of course gone after the election, the question is is he going to do now what the Conservatives tend to do after elections and end up helping the very richest and I think that would be the wrong thing to do.  

DM: Just on that, one more question on it, is it ideological for Labour because the jury’s out whether, the old argument about if you cut taxes you actually get more income for the Treasury because people are more prepared to pay, and these are people who can employ expensive accountants and move money offshore and things like that.  If it were proven to you that cutting the top rate back to 40p would get more income for the Treasury, would you accept it then?  

CHRIS LESLIE: Well I think all the evidence is to the contrary and I’ve seen data from the Institute for Fiscal Studies this week for example saying that that would cost hundreds of millions of pounds and you have to weigh that against where the priorities are.  Don’t forget, we have potentially the speculation that he is going to be hitting some of the very most vulnerable in society, the child tax credits and some of these other things, we don’t know yet but why he couldn’t say these things before a general election and be honest with people and yet now after an election suddenly he is going to reveal that, well people have to make their own judgements.  I think this is the second budget in the space of four months, I think the Chancellor obviously knew what he was going to do but was hiding it during the course of that election.  

DM: We are hearing an awful lot about the BBC as well aren’t we, about a substantial cut to its income by lumping the responsibility of paying for that tax rate for pensioners who are over the age of 75, they don’t have to pay the BBC licence fee, and making the BBC pay for it, certainly for the next five years.  What would your view be on that?

CHRIS LESLIE: All public institutions including the BBC I think have to do their part.  We have always said that sensible savings at this time are really important and I don't think the BBC can be excluded from that.  Again I want to see exactly the detail of exactly what the government are proposing, it’s not clear whether this is a back door way of ending the licence fee for the very most elderly in society so let’s just try and get a sense of what exactly the government are doing here.  They may be of course just trying to pass the buck to the BBC.  

DM: But didn’t you want to see that benefits means tested anyway at the very least?

CHRIS LESLIE: We said for the winter allowance that the very wealthiest pensioners should not receive that but again that was in our manifesto, we put that before the public.  We didn’t win that election so for us now, I want to do my job as the opposition, trying to make sure we pinpoint exactly what this Chancellor’s agenda is.  It has been very hidden so far but I am very worried about people on middle and lower incomes.  

DM: Last question, will his agenda in your view be revealed if he doesn’t do anything about non-doms whose status Labour was going to abolish?  

CHRIS LESLIE: Well I think he should take steps on tax abuse and tax avoidance.  They promised that they would, they’ve given a big figure saying how they would but again, when it comes to it in the Chancellor’s budgets he tends to fall short on these things.  

DM: Okay, well all will be revealed on Wednesday afternoon, no doubt we’ll be speaking again then.  Mr Leslie, thank you very much indeed, the Shadow Chancellor there.