Smith: 'Futile' to serve in Corbyn shadow cabinet
Owen Smith has said he will return to the backbenches rather than serve in Jeremy Corbyn's shadow cabinet, should he lose the Labour leadership contest.
Mr Smith said he would be a loyal MP but did not want to engage in "futile" work as Mr Corbyn could not win power.
But Mr Corbyn told a hustings event in Gateshead that Labour had grown "enormously" under his leadership.
The Court of Appeal is to rule later on whether recently-joined members will be allowed to vote in the contest.
The party's ruling National Executive Committee had previously blocked Labour members who joined after 12 January from voting unless they paid £25.
But five new members succeeded in getting the decision overturned in the High Court earlier this week - Labour subsequently appealed against that decision.
On Thursday evening, Smith and Corbyn clashed over Brexit but found some agreement on other policies.
The hustings in Gateshead, hosted by Sky's Sophy Ridge, was plunged into darkness for a minute as the rivals debated the UK's Trident nuclear weapons system.
Former work and pensions spokesman Mr Smith is challenging Mr Corbyn for Labour's top job, after the leader lost a no-confidence vote of his MPs.
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Many of his own MPs felt Mr Corbyn, who won a landslide victory to become Labour leader last year, had not campaigned vigorously enough for a "Remain" vote in the EU Referendum.
Mr Smith was among dozens of Labour MPs to resign from Mr Corbyn's front bench in protest at his leadership.
At the hustings, Mr Corbyn said he had been "shocked and disappointed" by the referendum result but added: "We now have to face the facts - the country voted for a Leave decision in that referendum."
He said Britain must now ensure workers' rights, human rights, environmental protection and access to European markets were protected.
But Mr Smith said he believed Labour had "not fought anywhere near hard enough" to speak up for Europe and that the leadership shown by Mr Corbyn "was not sufficient".
To boos from the audience, he told Mr Corbyn: "You never really bought into the idea of the European Union" and said there could be a case for a second referendum, if the deal on offer proved to be a bad one.
Mr Corbyn told him: "I think we have to recognise that whatever we feel about it, there's a result from that referendum which we have to work with."
Analysis, BBC political correspondent Iain Watson
There was passion and humour in the Labour hustings. At one point, the stage lights failed and the diminutive Owen Smith joked that he could now pass himself off as "the tall one".
But any wise-cracking camaraderie evaporated when the discussion moved on to what would happen after the leadership election.
Jeremy Corbyn appealed to Labour MPs to get "back on board" and pledged to create a shadow cabinet of all the talents
But that option may not be open to him. While Owen Smith said he'd have the current leader on his front bench, he made it clear he would not serve in a shadow cabinet led by Jeremy Corbyn.
Owen Smith's position is significant because if he now believes it would be pointless to return to a Jeremy Corbyn frontbench then many others in the Parliamentary party who backed a motion of no confidence in their leader are likely to agree.
So Labour's internal strife could continue long after the leadership election is over.
Following discussions about Britain's Trident nuclear weapons, gender inequality, the NHS and economic policy, Mr Corbyn was asked if he would serve in the shadow cabinet, should he lose the leadership contest to Mr Smith.
Mr Corbyn said he did not think it was likely Mr Smith would offer me anything." He pledged to make sure the "political spectrum" within the party was represented in his shadow cabinet.
Mr Smith told him "I would absolutely want you to be in the shadow cabinet if I was leader".
When asked if that meant he was "going to come back" to the shadow cabinet, Mr Smith replied: "No, I've lost confidence in you. I will serve Labour on the backbenches, because I'm Labour to my bones... But I would serve this party on the backbenches loyally. I won't do what Jeremy Corbyn did and won't vote against this party, my party, 500 times.
Mr Corbyn said that was "genuinely disappointing to me" as he had been pleased when Mr Smith became shadow work and pensions secretary last year: "I would've thought you would want to continue that kind of work."
Mr Smith replied: "I do, Jeremy, but I don't want it to be fruitless, futile work. I want it to be work that is leading to a Labour government that allows me to put into practice what I want to preach to the country. I don't want to be engaged in a protest movement talking to itself."
He said Labour was at 26% in the polls, its lowest point since 1982, and Mr Corbyn "cannot lead us back to power".
But Mr Corbyn, who was cheered several times during the event, told him: "Since the election last summer our party has grown enormously, 300,000 new members have joined because they want to see this country governed and run in a different way.
"And that has had an effect, we've had victories in Parliament, we've had election victories in by-elections, council elections and mayoral elections and our party has to adapt to a new way of working, we are now such a large organisation we've got to be and should be and must be involved in every single community in this country."
He said shadow chancellor John McDonnell had put together an economic strategy and analysis and said: "I say to all members of the Parliamentary Labour Party: Let's get on board and get together and put it to the Tories."
The Labour leadership contest result will be announced on 24 September.