ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well now, the Chancellor has found himself under increasing pressure over the last couple of weeks about planned cuts to tax credits.  Some commentators have gone as far as to ask if this could turn out to be his poll tax moment.  On Tuesday it is going to be debated in parliament and it’s one issue on which the Labour party seems to be united.  The Shadow Work and Pensions Secretary, Owen Smith, joins me now from Cardiff, a very good morning to you Mr Smith.  As I say, Labour united on this issue and do you think it has a chance of reaching out to those Conservatives who seem to be having deep misgivings about it?

OWEN SMITH: Well I think the country is united on it, Dermot.  It’s something that is going to affect eight million people, eight million households across the UK, three million of them are going to be losing £1300 a year as a result of the tax cuts and on our side of the House and I think on the Conservative side of the House there are I think deep misgivings about what that means for ordinary hard working families.  These aren’t the people who the Chancellor likes to call the scroungers, these are hard-working people on low income jobs and tax credits have been a vital lifeline for them and the Conservatives know that as well as we do.

DM: Exactly, that was the question I put to you but do you have insider knowledge, given your position?  Are you reaching out, have you had any private contacts with Conservatives who may support the Labour position?  

OWEN SMITH: Yes, I’ve spoken to lots of Conservatives last week and we’ll be doing it again next week and I think some of them will vote for us.  I am here talking to you from Wales, one of the Conservatives who has been most critical of his government’s position is one of the North Wales MPs, I hope he will decide that he needs to vote with his conscience and vote with us next week but the Prime Minister said he wasn’t going to do this before the last election, I think that was a lie and I think Tories know that right across the House and I think we have got to urge them to do the right thing and stop these cuts.  

DM: Okay and how fleshed out are the alternative proposals because the government’s argument is that these credits have ballooned up to around £30 billion now from an original £6 billion or something like that when they were introduced and it is far better that people earned money through work rather than getting it back through the tax system.  Do you go along with that analysis and it is just the implementation that you disagree with?

OWEN SMITH: No, I think it is real spin from the government.  Let’s get the facts right, Dermot.  When this variation, this version of tax credits were introduced around 2004, under the Labour government then from 2004 to 2009, the average tax credit bill then was £23 billion.  It’s under the Conservatives that the tax credit bill has gone up from £23 billion to £30 billion and that’s because we’ve seen a big fall in wages, £1600 on average over the last six years is the fall that most families have seen and that’s why tax credits have been bearing more of the weight.  But the Tories are also telling us of course that it will be offset by their so-called Living Wage which we know is just an increase in the National Minimum Wage that Labour introduced.  It’s welcome but it will only affect about 25% of those people who are losing money through tax credit change, it’s not offsetting at all I’m afraid.

DM: People will be very interested to know then, from what you’re saying there, that the Labour position is that there should be no change whatsoever to the tax credit system, that the payments should stay at the current level.

OWEN SMITH: Well I think there could be reform but my very clear view…

DM: How?

OWEN SMITH: … and the very clear view of the Labour party is that the worst thing you should do is get rid of these tax credits.  They are supporting people who are doing the right thing, staying in work, working very hard often on very low pay, it’s a work penalty, a disincentive so we are saying very clearly, do not get rid of them, keep the tax credits as they are, make sure that those people can stay in work, reverse this cut and we are giving them the opportunity to do that on Tuesday.

DM: Well the government isn’t getting rid of them, you know that, I know that, they are reforming them as you say so which is it?  

OWEN SMITH: Well they are cutting them very dramatically.  They are halving the amount of money you can earn before they start to withdraw them, they are freezing them for the full five years, it’s a £4 billion cut that they are implementing and as I say, that’s not coming away from people who are out of work, it’s coming away from people who are in work, trying hard.  So we are saying very clearly, it is bad economics, it takes demand out of the economy but most importantly, it makes life harder for the very people who the government say they are trying to help.  They keep telling us they are the workers party, Dermot, well if they were the workers party they’d surely be siding with the workers as Labour is and making sure that they retain the tax credits that they need in order to make ends meet, it’s very simple.  

DM: Now let me ask you about your brief.  You’ll have seen your colleague, the Shadow City Minister Richard Burgon, the other night on television perhaps not being fully across the brief he’s been given.  You’re the Shadow Work and Pensions Secretary and it was said in the Financial Times that you have no experience of the pensions industry, presumably you’ve been getting around and trying to meet as many representatives of that industry as possible, to get your head around things.

OWEN SMITH: Yes, I’ve been doing that. I was doing that at Labour Party conference last week, I’ve got a huge series of meetings, myself and the Minister for Pensions, Nick Thomas-Symonds, we’re meeting for example some of the women who are losing out as a result of the pensions reforms, I’m meeting with the Professor of Business at Cass University, David Blake, who is doing a pensions review for me, looking at what the pensions freedoms changes will mean.  I am very worried about that, I think the last Labour opposition wasn’t strong enough in scrutinising what the government is proposing to do about pensions, the shift that they took.

DM: Have you met anyone at the other end of it, the people that operate pensions schemes, some of those large companies?

OWEN SMITH:  I have and I’m meeting with ABPI, API, the overall body dealing with insurance who are also enormously interested in the pensions industry, I am prepared to meet with everybody.  I really want to get a clear understanding of what the government are trying to do with pensions.  We know we’ve got a pensions problem in this country but the worst thing you could do, and what I think they are doing, which is opening up pensions to potential mis-selling scandals.  There is a big report, you will be very interested to know, Dermot, coming out of the World and Pensions Select Committee on Monday, that I think is going to make very interesting reading for the government in terms of its concerns about what the government is doing on pensions, in particular the prospect of some of our most vulnerable pensioners, those with the smallest pension pots, being ripped off by some of the sharks who are circling the industry.  It is very interesting to see that there was a big spike in fraud in pensions in the very first month after the government introduced their pension freedom, it went up from one and a half million to five million.

DM: What about the concerns of small businesses and this issue of auto enrolment.  I guess you think it’s a good idea that people working for small companies do get access to pensions but small businesses saying this is a very big burden upon them.   

OWEN SMITH: Yes and I understand that.  We were fully supportive of auto enrolment, I am still fully supportive of auto enrolment.  We’ve got too many people in this country who don’t have adequate pensions.  We recognise, Labour and Conservative, that we’ve got a long term problem with people not investing and saving for their future and auto enrolment is the best way we could change that so I am very supportive of it.  We do need to make sure that regulation on small business is limited and minimised as best we can but this isn’t one of the areas where we should be backsliding, it’s crucial that people including those working for small business, are protected in lieu of adequate pensions, Dermot.

DM: Okay, Mr Smith, good to talk to you.  Owen Smith there, Shadow Work and Pensions Secretary.