Smith and Major clash over Labour 'tax for jobs' idea

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THE PRIME Minister and John Smith clashed yesterday over Labour's plan for a tax on the 'excess' profits of privatised utilities to pay for jobs and training for the 900,000 long-term unemployed.

In the Commons, Mr Smith accused John Major of holding a 'unique record' as the only post-war prime minister never to see an increase in investment, growth or employment. He said that unless the March Budget was overwhelmingly devoted to cutting unemployment it would be a failure.

Labour's as yet unspecified 'excess profits' tax is the centre-piece of its 'Budget for Jobs'.

The scheme was outlined yesterday as tensions emerged among Cabinet ministers over the possibility of 'workfare' - making benefits conditional on the long- term unemployed taking jobs or community work. That issue is on the agenda of the Cabinet committee set up by Mr Major in an attempt to get 250,000 of the long-term unemployed into work.

But yesterday, Gillian Shephard, Secretary of State for Employment, a member of the committee, said on BBC radio that workfare would be 'an extremely expensive solution'.

Mrs Shephard remained 'open-minded' on the idea - but appeared to dismiss it by describing it as 'flavour of the month'.

At Prime Minister's questions in the Commons, Mr Smith challenged Mr Major to adopt a 'windfall profits tax on the excess profits of monopoly privatised companies and use the money to create jobs'. The Government had imposed such a tax on the banks in the 1981 recession, raising pounds 400m he said.

Mr Major said this was 'the old Labour Party speaking', adding: 'They hate profits. They would rather have nationalised industries making losses than privatised industries making profits.'

Banks' profits in the early 1980s had been genuine windfalls from high interest rates when they did not pay current account interest, Mr Major said.

The Labour leader, however, argued that every pound of profit and of the 'fat salaries' paid to privatised utility managers had come from the British people. 'It's time they got some of it back to create jobs for them and their families,' he said.

Budget for jobs, page 7

Leading article, page 18

Commentary, page 25

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