ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well as summer officially begins for MPs, what’s the mood in the three main parties? Do the Conservatives have a spring in their step, should Labour be downbeat about the polls and are the Lib Dems getting any credit for the coalition’s work? Well I’m joined now by the Liberal Democrat deputy leader Simon Hughes, by the Labour MP Rushanara Ali and by the Conservative MP, Nadhim Zahawi. The camera has landed on you so is there a spring in the Conservative step? The economy of course is at the bottom of it all, the idea that we may be seeing a little bit more growth.

NADHIM ZAHAWI: Well I think it’s getting away with positive news, the news on unemployment coming down, employment rising, cutting the deficit by a third – these are all good news stories. I think the really important focus, if you look at the GDP figures, on service sector which is 80% of our output things have been solid for a long time now and growing well. It’s the construction industry and that leads to housing and that leads to the real boost which is why you heard the Chancellor deliver that in the spending review and I think we’re going to see that coming through next year. So it is good news but more to do. We’re not quite in green shoots of recovery mode but we are out of the intensive care unit and on our way to recovery.

DM: Rushanara Ali, is there a difficulty for Labour in all this, given your criticism of the government during the past two and a half years, about not doing enough to foster growth, well it’s beginning to come. You have to applaud that don’t you?

RUSHANARA ALI: Well it’s hardly beginning to come. The government is set to borrow £245 billion which is really not what we were told. We were told that they would end the deficit, complete the deficit, reduce it by the end of this term, that’s not going to happen. Unemployment, long term unemployment is the highest for 17 years, youth unemployment is still very, very high, so I don't think the government should be complacent at all. Nadhim talks about investment and infrastructure investment, much of it is not going to happen until 2015, 2017.

DM: These are just the opening salvos, let’s get the views of the Liberal Democrat, Simon Hughes where do you stand between those two positions? If you feel the economy is picking up do you feel the Liberal Democrats are not getting enough credit for it?

SIMON HUGHES: Well the first point is the national interest. We formed the government with the Conservatives, Labour lost the election, in the national interest because we were in a dreadful economic position. We were paying £120 million a day in interest on our debts, unsustainable. We looked over to the continent and we saw Greece in turmoil economically and so we agreed a coalition and it was a five year plan, it had to be to give the stability we needed, and we’ve worked away at it. It’s been slow and it’s been hard but the signs are that growth is slowly coming, the independent Office of Statistics indications for this week is that we are going to see growth for the past quarter, positive not negative. They corrected the last figures to make them bigger, not smaller. WE have seen huge numbers of private sector jobs created, more companies being formed than ever before, a million plus apprenticeships, unemployment coming down. Now we inherited from Labour rising youth unemployment, it started long before this government, and it is a dreadful scourge and that’s why the Prime Minister went to the European summit …

DM: I’ll come back to that but how much is down to the Liberal Democrats. Well let me put it to the …

SIMON HUGHES: It’s a coalition.

DM: It’s a coalition but the Chancellor is a Conservative and he appointed the Bank of England Governor and they’re the two guys pulling the levers aren’t they?

NADHIM ZAHAWI: Well Danny Alexander, Chief Secretary to the Treasury, is very much a part of that team, that’s important. I think it is a coalition but I think what is also important to remember is the focus on those who are finding it difficult, those vulnerable people so taking people out of tax for the first £10,000 was an important piece of work ….

DM: Thanks to the Liberal Democrats.

NADHIM ZAHAWI: … the 25 million people having a reduction in their tax, 2.4 million people paying no tax altogether so these are important things that we’ve done together in the national interest. It is about making sure that you work together and as Simon quite rightly pointed out, the figures showed a few weeks ago that the actual collapse in this economy was much bigger and deeper than Ed Balls had predicted or admitted to. Now what’s really interesting is that we don’t hear much of Ed Balls any more, I don't know where he is, I don't know what he’s doing at the moment but a few weeks ago he was on every television and radio station talking about us cutting too deep and too fast. That’s gone away and I think Labour need to find a position on this and at the moment they’re flip-flopping on this. One minute they talk about too deep and too fast and then the next minute it’s about actually matching our commitment.

DM: Well that’s a point to put to you, Rushanara Ali, have you been bowled a series of googlies here that are difficult to deal with for Labour on the question of spending cuts, questions of welfare, even the NHS?

RUSHANARA ALI: Well look, the fact is that Nadhim and Simon are in this double speak. On the one hand they are saying squeezed living standards, we’re trying to do something about it – that’s a sop to the Liberals. The reality is that the Conservatives are dominating in the economic agenda by giving tax breaks to millionaires, bonuses to people with those additional tax breaks, that’s the interest group they’re interested in and ordinary families are losing out by nearly 2000 a year despite the changes that the Liberals have successfully managed to get on, lifting people out of the tax bracket and …

DM: But do you think that narrative of gloom actually works when things are beginning to pick up, employment is going up, there are tax cuts?

RUSHANARA ALI: Well long term unemployment is still appalling and I know that in constituencies like mine and the housing subsidies are potentially likely to cause an artificial boom that could be very damaging to the economy and borrowing has gone up and that is a serious issue for this government.

DM: That is a very good point, Simon Hughes, it is a housing bubble isn’t it? No one can get on the housing ladder and you lot have done it, throwing even more money at it, we’re going down the same street again.

SIMON HUGHES: No, no. The deficit has been cut by a third … let me just deal with that point, we have a fairer society because we have a …

RUSHANARA ALI: Try telling that to my constituents.

SIMON HUGHES: Well my constituents are next to your constituents, Rushanara and …

RUSHANARA ALI: And the millions of people who are suffering at the moment who don’t have jobs.

SIMON HUGHES: I didn’t interrupt you. My constituents are next to your constituents and they know that they’ve had the tax threshold lifted, you conceded it, 24 million people are paying less tax, 2 million people are paying no tax. The pensioners know that although it’s hard, they had the largest state pension increase last year since the pension was created and you’re wrong about top people paying less tax, actually Labour for 13 years had a top rate of tax … I’m sorry, it is a fact, for 13 years you had a 40p tax rate apart from the last few days of the Labour government.

RUSHANARA ALI: And you decided to cancel it, you a Liberal Democrat, it’s just shocking.

SIMON HUGHES: No, Rushanara, listen, we brought it down to 45p in the pound but changed other taxes like …. But net rich people pay more, the ONS show that they’re paying a greater proportion and on housing the big scandal is that we don’t have enough affordable housing, we are also allowing a lot of new housing to be sold off plan abroad so that people in the UK don’t have a chance to buy it, that for me is one of the priorities of the next two years, more affordable housing.

DM: They have been ganging up on you, I’m going to clear you some space now Rushanara Ali.

RUSHANARA ALI: My turn now gentlemen. The thing is that Simon’s party on the one hand has tried to do things like support the squeezed middle but they have conceded on the fact that it’s the millionaires that are getting tax breaks because of the Conservatives and as a result it is …. There is no point in having a Liberal party in coalition because they are damaging people’s lives.

[All talking at the same time]

DM: Okay, you’ve ganged up on Rushanara, I’m going to try and see if you two are sticking together. There has to come a point, Nadhim Zahawi, we know it, you’re in coalition but you’ve got to campaign as individual parties in a general election, there is going to be a point is there not where the Conservatives want to claim benefits for the so-called good things that are in people’s minds and say yeah, yeah, that’s us.

NADHIM ZAHAWI: And we are claiming benefit.

DM: For what?

NADHIM ZAHAWI: We’ve cut immigration by a third, that’s very Conservative. The agreement to make sure that we balance the books was a Conservative demand on the coalition, that’s Conservative.

DM: Abu Qatada.

NADHIM ZAHAWI: Abu Qatada, Abu Hamza before Abu Qatada’s extradition, let’s not forget him. These are all important Conservative achievements but you see Rushanara, the real problem … I want to put this to her. Chuka Umunna yesterday in the Financial Times talks about having no problem with people making a million pounds or two million pounds yet Ed Miliband attacks …

RUSHANARA ALI: We have a problem with giving tax breaks to them.

NADHIM ZAHAWI: … millionaires and that’s the real problem.

RUSHANARA ALI: I have no problem with that but tax breaks for millionaires when ordinary people are suffering is not …

NADHIM ZAHAWI: Millionaires pay more tax today than they paid under your government Rushanara, you know that.

SIMON HUGHES: In a coalition both parties seek to get as much as their manifesto as possible, roughly speaking two-thirds of the things in our manifesto are being delivered, of which the tax cuts are the biggest, of which more money for poor children in schools is a significant second and so many other things like staying in the European Convention on Human Rights and not getting rid of it. The Tories have also had a significant number of things, of course you do in a coalition, but the deal is a five year deal and if the economy recovers, if we have a fairer society and a stronger economy at the end of these five years with more people having a chance of getting on in life, it will be a shared achievement. We then go to the next election fighting each other, of course we do, we did in the Eastleigh by-election, the Tories tried to win the seat, we held them off. We will of course fight the other parties, that’s what a general election is about but the country wanted stability, we’ve given it stability and it will have stability for the next two years and then we’ll have an election.

DM: Rushanara, you mentioned Ed Miliband, do you think he’s cutting it? The polling for Labour is still not bad but the gap has been closing but for Mr Miliband it’s terrible.

RUSHANARA ALI: I don’t agree with that. What Ed has demonstrated is that he can reform and lead his party, he has taken vested interests on whether it is on the phone hacking scandal or more recently vested interests within and connected to our party as well as on the lobbying issue for instance. David Cameron promised to do something about lobbying, he’s now hired a lobbyist, working in Number 10, for tobacco and alcohol. That is hypocrisy.

DM: Lynton Crosby.

RUSHANARA ALI: Exactly.

DM: That is the allegation.

RUSHANARA ALI: And Ed Miliband is not someone who will stand for that kind of behaviour, this is someone who stands up for …

DM: But then he gets slapped around with Unite.

RUSHANARA ALI: That’s not true, where there are issues whether it’s unions or phone hacking, any of those issues, if you look at that and the media has responded positively, largely favourably to his leadership on these issues, Ed Miliband has taken a stand on them.

DM: Okay, talking about leaders, Nick Clegg, he’s not in charge of Prime Minister’s Questions and nobody seems to watch Deputy Prime Minister’s Questions, that’s how Mr Cameron – we saw him at the last Prime Minister’s Questions talking about employment up, immigration down, it was all as if it is coming …

SIMON HUGHES: Look, all the key decisions are taken by both parties, that was the nature of the deal.

DM: But looking at personality and Mr Cameron.

SIMON HUGHES: Well Mr Cameron is the Prime Minister so he answers Prime Minister’s Questions and the Deputy Prime Minister answers Deputy Prime Minister’s Questions and they share responsibility for the policies of the whole government and Nick has said for example that in the remaining two years we have to make a renewed effort to make sure 16-24 year olds get a better opportunity because all over Europe they are not doing as well as they should do. We’ve increased apprenticeships, we’ve made sure that youngsters with the poorest backgrounds are not disadvantaged from going into university and as Deputy Prime Minister ….

DM: But how does Nick Clegg signal to the emphasis at this point of decoupling, how does he say this is where the Liberal Democrats part?

SIMON HUGHES: Well we don’t part, we’ve got a five year plan. Now the great British electorate at the next election will decide what share of the vote each of us get and how many of us are returned and they could do one of three things I guess. They could give a Conservative majority, a Labour majority or they could again decide they are not going to trust any of us on our own.

DM: You didn’t mention a Liberal Democrat majority there.

SIMON HUGHES: It’s unlikely to go from third to first but obviously we’re hoping to hold all the seats we’ve got and gain some more and hold the balance of power again and influence government again because we think the coalition has done a good job but the electorate decide those things, you know that. But we are clear we have two years of work to do.

DM: We are running out of time but we have to ask about Mr Cameron. I mentioned spring in the step, his old confidence seems to have returned and he seems to enjoy this position, he’s worse when he’s on the back foot.

NADHIM ZADHAWI: He’s best when he is delivering what is important to the country so the economy, education reform, more free schools, more academies. We came to office with 200 academies and there’s now 2,200 academies. On welfare, capping benefits, Labour voted against every welfare reform we wanted to introduce – that’s where you’ve got to be strong.

DM: But you’ve got to be careful of not letting the confidence … because there isn’t much really there, it could all disappear, particularly on the economy.

NADHIM ZAHAWI: Absolutely right, we’ve moved from rescue to recovery and we’ve got to make sure that …

DM: But on that issue of personality, the issue of looking out of touch, if he does get that swagger in his step he can look a little imperious, a bit Lord Snooty.

NADHIM ZAHAWI: Well I don't think he does. Look at the speech tomorrow, he is talking about things that are important to parents, internet safety. I was actually part of the meeting on internet safety at Number 10 Downing Street a few weeks ago where he brought in colleagues from all parts of the Conservative party who care about this issue. He is taking it very, very seriously, these are important things to the country, to your views and I just want to come back to Rushanara about Len McClusky and ….

DM: We haven’t got time, I’m sorry …. Thank you very much Rushanara Ali, Nadhim Zahawi and Simon Hughes, thank you all very much.