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DERMOT MURNAGHAN:
Slashed growth forecasts, record youth unemployment and a continued political and economic crisis in Europe. Things couldn’t look much gloomier for the economy and all this before planned national strikes next week. In a moment I will be speaking to the Chief Secretary to the Treasury, Danny Alexander, but first let me introduce out tweeters today, they are Oliver Wright, the Whitehall editor of the Independent, we also have the Evening Standard’s political editor, Joe Murphy and Paul Waugh, editor of Politics Home, they provide their reaction via Twitter which you can read on the side panels if you are watching in HD and you can follow on our website, skynews.com/politics and of course we want you to join in using the hashtag #murnaghan. Well let’s say a very good morning to Mr Alexander. As I painted that gloomy economic picture to say the least, give us your sense in your own words of just how perilous the economic situation is, are we on the brink of another recession?

DANNY ALEXANDER:
Well we face very, very difficult and very challenging times for our economy. When we came into office we inherited the deficit that you referred to earlier and we have to deal with that situation in the way that we’ve set out but obviously the situation in the eurozone, which is our largest trading partner, three million people’s jobs in the United Kingdom depend on our trade with Europe, is something which is a real danger to the United Kingdom’s economy and that’s why we are working so hard to work with our partners in the eurozone to help them sort out their problems as well.

DERMOT MURNAGHAN:
You were referring back there to when you came in to office and that deficit reduction plan in particular but the circumstances have changed, the growth forecasts have dropped, unemployment has gone up and the eurozone has occurred, yet that plan stays in place. Is it, to coin a phrase, fit for purpose any more?

DANNY ALEXANDER:
Well I think it is. If anything I think the circumstances that have changed over the last 18 months strengthen the case for the action that we took to get ahead of the curve. Just before we came in to office, British bond yields, the interest rates that people demand of us to lend the country money which we need to borrow at the moment, were the same as Italy’s. Since our general election, we took control of our circumstances, we put in place a plan that gave people confidence that Britain was able to pay its way in the world and now you see a situation where Italy, who we were level pegging with, are now facing these huge, huge challenges, they have had to change their Prime Minister to deal with them, whereas the UK has seen low interest rates which isn’t just a number on a page, it helps keep people in their homes, it helps keep people in their jobs, so this is not some kind of ideological determination to stick to the plan no matter what, it is delivering real benefits to the British economy and that’s why we need to continue with our focus on deficit reduction but of course …

DERMOT MURNAGHAN:
But there are other things you can do, as we were hearing from the Shadow Chancellor earlier this morning, saying well look, it doesn’t seem like you have a plan for jobs and growth. The unemployment figures show that on jobs, the growth figures show that as well, revised continually downwards.

DANNY ALEXANDER:
Of course the United Kingdom is facing enormous pressures, particularly in terms of what is happening in our largest markets in the eurozone, in the United States too we saw political difficulties there earlier in the year.

DERMOT MURNAGHAN:
But they are beginning to pick up economically in the United States.

DANNY ALEXANDER:
The one thing you can be absolutely certain would make our position worse would be to follow Ed Balls’ so-called Plan B. Stepping away now from a plan which has got confidence in Britain, which has kept our interest rates low would put Britain right back into the firing line at a time when we are seeing in big countries in the eurozone now, the damage that being in that firing line can cause. Now I’m not saying there is not more that we need to do, in fact there is a great deal more that we need to do and that’s what we will be setting out in our autumn statement in ten days’ time and I am happy to go through some of the areas that we’ll be covering there because I do think that Labour’s legacy to this country wasn’t just the problems that we inherited in our finances, it is the fact that we have an infrastructure in this country which is sub-standard.

DERMOT MURNAGHAN:
Well you can give us a snapshot, give us some of the concrete things that you do because people are crying out for something they can hold on to, something they can see, the government taking action, the government giving the signs that it is taking this crisis seriously.

DANNY ALEXANDER:
Well a particular focus for me as a Liberal Democrat in the Treasury is infrastructure. We have over the past 13 years, Labour failed to invest in our nation’s infrastructure. What we need to do is do more as a government to project our infrastructure forward in the transport area, in housing and we will be making announcements on those things in the next few days but also to get more private money too into infrastructure. We have been working for example with pension funds to see if we can get more pension fund investment into British infrastructure because we know from across the world that countries with the best infrastructure have the best potential for growth, so that’s a major area of focus for us. Likewise education and skills.

DERMOT MURNAGHAN:
A lot of people will say you are only thinking of this now, the economy was bad when you came into power.

DANNY ALEXANDER:
In fact in the spending review when of course everyone naturally focuses on the cuts that we are making, because we have to make significant cuts to get our economy back on track, within that we actually put more money into transport spending over the next four years than Labour managed over the previous four, because we recognised then that this is a priority but because we have to do more, because we have to do more to support the economy to keep us safe and make us strong in the future, that is why we are going to be focusing even more on infrastructure.

DERMOT MURNAGHAN:
Do you appreciate, the Bank of England is independent of course but engaging in another round of quantitative easing, you appreciate that, that’s something you are glad they are doing?
 

DANNY ALEXANDER:
Well it’s one of the, if you like one of the flexibilities that we have as a country, that because we have a strong fiscal plan dealing with our deficit, we create the space for the Bank of England to use monetary policy and of course the credit easing that they have announced that they are undertaking is an important part of…

DERMOT MURNAGHAN:
Credit easing, yes, but the quantitative easing, the £75 billion, do you think it might take more than that?

DANNY ALEXANDER:
Well it’s for the Bank of England to make those judgements, I am not going to advise them on how much they should do. They have announced £75 billion of quantitative easing, that’s going to go on over the next few months and it will be for them to judge whether they think more is needed. One of the areas that we are looking at is credit easing and we will be making announcements about that in the autumn statement, which is about using the government’s balance sheet to try and get money directly to small businesses because of course it is the small businesses and the private sector who are going to lead the recovery in this country, who can deliver the jobs and the growth that we need.

DERMOT MURNAGHAN:
Let me ask you about a section of our community that you haven’t won the argument with and it seems you are not going to, with the public sector unions, with the discussions you have been having for months and months now about pensions and pay and conditions. Strikes looming on November 30th, it seems they are going ahead and the Cabinet Office Minister, your colleague, Francis Maude, has been saying that if the strikes do go ahead – and presumably there is still a little more talking to do but if they do go ahead you might look at changing the strike laws, given that the way that many union’s ballots work it turns out that a minority of its members end up voting for strike action.

DANNY ALEXANDER:
One of the things that is so strange about these strikes is that they are occurring in the middle of the talks at a time when the discussions are still going on, following a very strong and positive and I think generous offer that we made the public sector workers, that I made at the beginning of this month, which means that public sector workers on low and middle incomes could very well receive a better pension in retirement than they receive at the moment. Of course we are asking them to contribute more, of course we are asking them to work longer but people can get a better pension ….

DERMOT MURNAGHAN:
But that is the argument …

DANNY ALEXANDER:
That is the argument but ….

DERMOT MURNAGHAN:
But you don’t seem to have won it because the strikes are slated to happen. What I wanted to ask you about is if they do happen, would you look at changing the strike law, that anomaly where you end up with a minority of union members voting for it?

DANNY ALEXANDER:
If I may say so, Dermot, I don't think you should dismiss the argument. One of the issues here is that we need individual doctors, individual nurses, individual teachers, individual civil servants to understand for themselves what this offer really means. That’s why we have a lot of information direct to workers, that’s why …

DERMOT MURNAGHAN:
A lot of people will be heartened to hear the fact that the talks still go on, there is still a chance but the unions have said the strikes are going to happen and they are going to be very big. Now your colleague in Cabinet has said that if they do happen, we’ll look and we’ll consider thinking about changing the strike laws. Do you agree with Francis Maude?

DANNY ALEXANDER:
Of course we have to look at those things and we will and we are looking at those things but that is not the main response to these strikes. What we have to do is recognise of course that the strike action is going to do damage to public services, is going to do damage to the economy too, and that’s one of the reasons why it is so irresponsible for the trade unions to be going on strike, in the middle of talks at this very difficult time for the economy but what I’m focused on is explaining directly to public sector workers what it is we are really offering so that those people can understand what they are going to get. That’s why over the next few weeks in each public service, we will be putting calculators on websites so people can go in, put in their own circumstances and see for themselves what it is that we’re genuinely offering them. I think when many public sector workers look at that, they will realise that a lot of the propaganda they have been getting about how bad it all is, is simply wrong and that actually what they’ll want to do is not go on strike but encourage their union leaders to come to the table and reach an agreement with the government.

DERMOT MURNAGHAN:
Hopefully there is still time but …

DANNY ALEXANDER:
I think the constructive thing for the unions to do would be not to go on strike, would be to say we now have a good positive offer here, we don’t need to go on strike at this time and instead we are going to carry on talking. That would be best thing for their members and for the country.

DERMOT MURNAGHAN:
The unions say we try an defend not just those within our unions but those weaker members of our society and we are talking about many people on benefits. Now we’ve got this issue about the September inflation figures and the rating of benefits in line with the retail prices index, which if I recall was 5.6% …

DANNY ALEXANDER:
The consumer prices index which it switched to last year.

DERMOT MURNAGHAN:
Right, the consumer prices index was 5.2%. Is that too high a figure? The projections from the Bank of England are that inflation will start to drop very rapidly, do you want to break that linkage because that is a discussion that we know is taking place?

DANNY ALEXANDER:
Well the Chancellor will set out in his autumn statement in ten days’ time, as is normal every year it happens at this time, what the uprating policy will be but what I say is we have not as a government, and as Liberal Democrats we have not shied away from reforming the welfare system, we have made some very difficult decisions over the past 18 months to make savings in the welfare system, to increase incentives to work and to make it a system which delivers the objectives that we want as a society but those are changes which have been based in principle, they are changes which are based on the long term interests of the welfare system, they haven’t been arbitrary one-off changes and or course in looking at this uprating issue, which as you say we are looking at, we need to make sure that we handle it in that same way. I am not going to get into what we are going to be announcing in ten days’ time but those discussions are still going on but both Liberal Democrats and Conservatives are committed to not balancing the books off the backs of the poor and it is very important that we stick to that principle.

DERMOT MURNAGHAN:
I wanted to go to the other end of the scale, you mentioned not balancing the books off the backs of the poor, have you Liberal Democrats won the argument about that very top rate of tax for very high earners, the 50p rate, that’s here to stay whether or not it makes money for the Treasury?

DANNY ALEXANDER:
Well as you know, there will be some further information on that coming forward in the first half of next year but I think it is very, very important indeed that we continue to make sure that the wealthiest in society pay a fair contribution. That’s what the 50p rate is doing.

DERMOT MURNAGHAN:
But looking at the figures it’s unnecessary, you just want it there as a symbol that those with the broadest backs, as you said, bear the greatest burden.

DANNY ALEXANDER:
Well we’ll see what the numbers show. I suspect it will show that it is bringing in money for the government but we’ll have to wait and see but insofar as we have the capacity to cut taxes, and that capacity is very, very limited because of the difficult circumstances I were talking about earlier, I think the focus should be on people on low and middle income earners, that’s why we have set out our first income tax priority is to ensure that no one earning £10,000 pays any income tax at all. We are taking steps along that road, that was the main manifesto commitment of the Liberal Democrats at the election, it’s the right place to focus. People are working hard on low and middle incomes should be the beneficiaries of anything that we can do as a government, not the very wealthiest, at a time of austerity.

DERMOT MURNAGHAN:
Can I lastly just ask you about the eurozone crisis, we haven’t really touched upon that of course looming large, but dimensions of it affect domestic politics, this ideas that at some point there may have to be a new Treaty and many on the Conservative side particularly saying that then means there will be an opportunity for Britain to go to those discussions about a crisis, a financial and economic crisis, and ask for the repatriation of some powers to Britain. Do you think that Europe has taken too many powers away from the United Kingdom and that powers such as the Working Time Directive could be something we could scrap in this country and is something that should be put on the table during those negotiations?

DANNY ALEXANDER:
Of course it does remain to be seen whether Treaty change is the route down which Europe decides to go and there will be many opinions amongst all 27 member states, that debate has got a long way to go. Of course what we want to do first and foremost is make sure the eurozone takes steps to protect its economy but we have to protect our national interests and …

DERMOT MURNAGHAN:
So it is a side issue, the repatriation of powers because there is an economic crisis?

DANNY ALEXANDER:
Let me just answer the question in my own way if I may. We have to protect our national interest as a country too and that national interest I think centres around continuing to be at the centre of discussions at a European level. This is our largest trading partner, the largest trading block in the world and what we mustn’t do is get into a position where because we end up focusing on peripheral issues, we sideline Britain from those European discussions. On the Working Time Directive, you mentioned that and it is something in the coalition agreement where both Liberal Democrats and Conservatives said we agreed and we do agree, that it’s an issue that deserves further work and further attention but I think what we should be seeking to do at a European level is put forward a plan for growth, a plan for deepening the single market, a plan for strengthening those free trading links that make the European Union such a powerful engine for growth and of course deregulating at a European level too. That’s a British agenda for growth in Europe, it’s a positive argument that we can and will be making.

DERMOT MURNAGHAN:
Okay, Chief Secretary to the Treasury, thank you very much indeed for your time. Danny Alexander there.