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DERMOT MURNAGHAN: Well now, should wealthy pensioners give their benefits such as the Winter Fuel Allowance back to the government? The World and Pensions Secretary, Iain Duncan Smith, says he would encourage everyone who does not need them to hand them back but in the last hour his cabinet colleague Ken Clarke told me there would be no such system for doing that. In a moment I’ll ask the Business Secretary Vince Cable what he thinks of all that. Well let’s say a very good morning to the Business Secretary, Mr Cable can I start with this from Iain Duncan Smith first of all? I know you hand your benefits to a charity, do you think other people should be encouraged not to claim them or to hand them back to the Exchequer?

VINCE CABLE: Well people can deal with it in different ways but I think it is more important to address the big principle here, that we’ve been through a very difficult time after the financial crisis, a lot of people in work have been hit badly but relatively affluent people of pensionable age have been protected and there is an anomaly there and it is a deep anomaly because the reason why a lot of these fringe benefits were brought in like Winter Fuel payment, is because the state pension was being eroded. Under this government the state pension has been protected, we’ve introduced the so-called triple lock and there’s much less need for it. I think my party’s view is that we’ve got to address this in a more systematic way rather than just relying on individual conscience and approach the issue of these fringe benefits properly either by suggesting that they should be taxable or restricted to say older pensioners who are less fit for example but Iain Duncan Smith has raised an important issue.

DM: But within what we’ve heard, we know that position from the Liberal Democrats, we also know the Prime Minister’s position from before he was elected, read my lips, it is a promise from my heart, these benefits are safe – they can’t go back on that during the course of this parliament. In the interim Iain Duncan Smith’s idea is to hand them back.

VC: Well we have a coalition agreement which makes it difficult to deal with this in a systematic way. I think Iain Duncan Smith is acknowledging that there is an issue here, that relatively affluent people of pensionable age have done relatively well in very difficult times and it would be fair to acknowledge that. Some people will give it back, some people will fund charities, others will do nothing. Relying on individual contributions obviously is not a systematic way of dealing with it but at least he’s flagging an important question and it’s important that he’s raised it.

DM: But do you think this systematic way of dealing with it, as you put it, could be addressed before the election?

VC: Well it’s difficult to address it before the election because there’s a coalition agreement not to open up this question but I think the different parties, it is clearly now on our agenda and we will set out how we want to deal with it. What we have done before the election of course is to protect the basic state pension, it is one of the big reforms that this government has brought in and is often overlooked. One of the first steps we took was to introduce the triple lock so that pensioners get the higher of earnings increases or inflation and the state pension has been protected after many years in which it declined and in which pensioners were increasingly relying on means tested benefit. We turned that corner, we dealt with that problem so a lot of things that went with the old system, and these fringe benefits which are untaxed and not means tested, I think we just have to look at those again in a different way.

DM: But it shows up the whole, the wider argument, Secretary of State, about ring fencing, as we enter another tough spending round, there are these questions about other areas, whole departments, Health and International Development, should they continue to be ring fenced?

VC: Well in the past I have been very critical of ring fencing as a matter of public spending management but this government collectively agreed we should do it so I’m part of that government so I go along with the principle of it. As far as I’m concerned I head up a big spending department but I shall be making a very, very strong case that the things we do which are to do with science and innovation and training and further and higher education, that these are absolutely critical for economic growth and I would expect them to be very strongly supported so that’s a case I will be making with my colleagues.

DM: And Mr Cable, to the local elections, is the Liberal Democrats big nightmare not necessarily about the number of seats, the number of councillors but the overall number that UKIP could out-perform the Lib Dems nationally?

VC: Well we’re not putting numbers on what we think will happen. I am pretty positive about our performance in local government and what will happen in the county elections, I’ve been round the country a great deal and Liberal Democrats have a very strong local government base, we’ve got people who work hard. We have a slogan that where you work you win, we’ve shown we can do that in the recent parliamentary by-election in Eastleigh and where we’re strongly entrenched in local government, our people’s contribution is acknowledged and even where people are being pessimistic about it, we often out-perform. Just last week the Liberal Democrats won a seat from Labour in Newcastle for example and that kind of move against the trend is quite common so I expect our people to do well in the elections.

DM: On UKIP, would you welcome the examination that many of their candidates are now facing as people start to take them more seriously, the press and of course the Conservative party are beginning to look into the backgrounds of some of the candidates?

VC: Well I think it’s very important that UKIP are subject to the kind of scrutiny that we’re subjected to and other major parties, that’s absolutely right. I have never believed that it is sensible to deal with UKIP by insulting them or ignoring them, they are a force at the moment and they should be subject to scrutiny, subject to debate and let’s try and find out what their policies are, it isn’t terribly clear. In the economics field for example that I am particularly interested in, they seem to be promising to spend more on lots of things, not just the armed forces. They want simultaneously to cut taxes and they say they can improve the budgetary position of the government while doing those two things, it doesn’t add up to me but no doubt they have got an explanation and I think we’d all be interested to know what it is.

DM: Okay, can I just clear up one thing, this issue of One Direction, the pop band, which you seemed to pronounce on about the amount of money they were getting individually and then you said you were mistaken, you didn’t know you were being asked about One Direction. I am going to ask you now more broadly about those in show business, those perhaps in Premier League football, do they deserve the huge salaries, the huge wages that they get?

VC: I gave no comment actually about One Direction, there was a bit of misunderstanding or misquotation, I’ve nothing against them in particular. No, if people who are in professions which don’t depend on government support in the way that the banks have done, then of course they have got to be set in the market in which they operate providing there’s competition, providing they pay taxation, we don’t believe in having an incomes policy. What I have been trying to do in my own department, and we have now got this through parliament, is making sure that in companies that are in the public arena, that shareholders should have a binding vote over people’s pay but where they are in private companies or say in pop groups who often are self-employed, well it’s not the job of government to say how much they should be paid. They should of course pay their proper taxes.

DM: But you could have a view on whether they deserve the money or not? I mentioned footballers as well, Louis Suarez on about five million pounds a year, does he deserve that amount of money given that he is far from a role model?

VC: Well they are paid vast amounts of money but equally they are subject to a lot of public scrutiny and if they don’t perform their fans make it very clear that they should be moved on or moved down so there is sufficient discipline in that sector that we don’t need government intervention to sort it out.

DM: So you are, to steal from another politician, totally relaxed about people vast amounts of money for seemingly not doing an awful lot?

VC: No, I’m not relaxed about inequalities in society but in some cases it does require some form of intervention which is why we’re introducing binding shareholder votes on executive pay but for the most part these things are best dealt with through the tax system, having a progressive tax system and helping people at the bottom end of the income scale, so last week I announced an increase in the minimum wage for example to ensure that people at the bottom in work are properly protected, that’s the way we should proceed.

DM: Okay Mr Cable, thank you very much indeed, the Business Secretary there, Vince Cable, live in Northumberland.