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DERMOT MURNAGHAN: Well the Conservative party has led the biggest changes to welfare for sixty years. The Liberal Democrats have supported the reforms, up to now, but are they becoming increasingly uncomfortable with some of the rhetoric used by their coalition partners? In a moment I’ll speak to the Chief Secretary to the Treasury, Danny Alexander. Let’s say a very good morning then to the Chief Secretary to the Treasury who joins me now from Dornoch. First of all, Mr Alexander, this issue of how comfortable the Liberal Democrats are with some of the language surrounding this welfare debate and in particular the linking of the discussions with the issue of Mick Philpot?

DANNY ALEXANDER: Good morning and you’re right to say that the welfare reforms are ones that we’re taking forward as a coalition government because it is essential that we get to a position where we have a welfare system in work in which it is always the case that someone is better off in work than they are on benefits but with regard to the Philpot case, I have said over the last couple of days that that is a tragic case, it’s one where rightly the vile individuals who committed that crime have been properly and severely punished by the courts and of course children died in that case and I don’t think that it’s helpful to connect it to the wider debate on welfare reform but that debate does need to happen because delivering on the changes that we promised to do to the welfare system is vitally important to ensuring alongside the tax changes like the big reductions income tax for working people that are coming through this week, that we have a system which is much more about rewarding work, encouraging people to go out to work and that’s what we’re doing.

DM: But just on that linking, the Prime Minister has done it and your colleague the Chancellor has also done it, the linking of the Philpot case with the discussion, it takes something illustrative, for something to get a handle on, to discuss the whole doesn’t it, about the number of children you should be able to have on benefits, about the amount of money overall you can get through the benefit system.

DA: Well I don’t support ideas like capping child benefit for the number of children you can get for example which has been floated by some. What I do strongly support are the changes that are being made, that as a coalition we have decided to make, to ensure that the situation that we inherited from the Labour party which is one where people were often in a position where they would be better off staying on benefits than going into work, is completely wrong and the changes we’re making both to save money in the welfare system and also the big reforms, particularly universal credit which starts coming through this year, are all about saying we have got to make work pay. For those who can, they should be encouraged and incentivised to work through both the tax and the welfare system. Of course we need a safety net for those people who are unable to work and that very much remains at the heart of the welfare system under these reforms but for everybody else there have to be much stronger incentives and encouragement to go out to work and also much stronger rewards when you’re in work, which is why cutting income tax for working people is the central Liberal Democrat commitment that the government is delivering this week.

DM: I want to get on to tax in a moment or two but lastly on this, do you agree with your colleague, Lord Oakeshott, that playing politics with death as he puts it is not the way forward on the welfare debate?

DA: Well I’m not going to echo those comments, I’m not sure that inflammatory language on any side of this is really very helpful. I think what’s important is to focus on having a welfare system that works, having a welfare system that encourages people to get out to work, reducing the costs of our welfare system too – after all at over £200 billion a year it is nearly a third of all public expenditure, as we deal with the massive financial problems inherited from the Labour party, we have to make those changes. By the way, I think it is extraordinary today that the Labour party has come forward with its own proposals to increase the cost to the welfare system, from the Shadow Work and Pensions Secretary, who is the person who left a note for my predecessor saying there’s no money left, to now come forward with ideas to spend even more money on the welfare system just shows how out of touch with reality the Labour party are and you know frankly, having created the mess in our economy in the first place and now proposing to spend more rather than make savings, I think that party has completely lost all credibility on the economy and on welfare.

DM: But they do point out, you’re trumpeting – you touched on it there – the increase in the personal allowance, that huge increase and it’s continuing to go so but they would point out, the opposition, that your big tax cut for millionaires, the fact that you’re dragging 400,000 more people into the 40% tax rate, the granny tax – the list goes on.

DA: As a Liberal Democrat in the coalition government my priority has been to deliver big tax cuts for working people. As a consequence of the changes being made this weekend, people on low and middle incomes, working people will get some real practical help. Since 2010 nearly £600 a year less in income tax being paid by 25 million working people in this country, that’s £50 a month, I think that’s real help and we’re also asking the wealthiest to pay more in this country. Labour’s criticism, which I think is pretty synthetic given the way that they left loopholes all over the tax system for the wealthy to exploit, we are actually asking the wealthiest in this country to pay more in each and every year of this coalition government than was paid under Labour. Change is coming through this week such as for example the change in the tax system on high value property so that rich people can’t hide their mansions in offshore companies, changes to the tycoon tax to cap these unlimited reliefs that very often meant that people could reduce their income tax bills to nearly nil, asking people who fly in private jets to pay tax on that journey – it was extraordinary that under Labour everyone else’s air travel was taxed except those of millionaires and their private jets. We’re changing that this week.

DM: I mean you can’t get away from the fact that you give us that list but right back at you I suppose Labour would say what about the 13,000 people or so who earn a million pounds or more who are getting on average a £100,000 present from the government, why do they deserve that?

DA: What I’d say is two things, firstly as a result of all the changes that we have made and that are coming through this week, we are raising five times more from the wealthiest in this country than the cost of having a 45p tax rate. Of course during Labour’s 13 years in office the highest tax rate was 40p so our 45p rate is still higher than that and what we discovered when we looked at it and we got the experts at HMRC, and this was looked at also by the Independent Office for Budgetary Responsibility, found was that the cost of reducing this was very small because of the behavioural consequences of this tax. So I think it is better to have a system where we are raising taxes on things like wealth, on high value properties and so on, where we know we can get the money in and therefore ask the wealthiest to make a bigger contribution. It’s important of course that those who make the biggest contribution … that have the biggest wealth make the biggest contribution because it is essential that as we deal with the enormous financial problems this country has, we do so fairly.

DM: Let me ask you about some of the people who may have helped to contribute to some of our dire economic circumstances, I’m talking about those HBOS executives who were so roundly criticised last week. Do you think they should be able to hang on to their titles and if ex-Sir Fred Goodwin was stripped of his, why not James Crosby and Lord Stevenson?

DA: Well the report that was published at the end of last week is a very powerful report, I’m still studying it in detail and it’s right that the people at the top of the banks who made the biggest mistakes need to be held accountable. My colleague Vince Cable is looking at whether there is action that can be taken under legal powers that he has, I support him in doing that, that is the right way to approach this. The sad fact is though that these mistakes were made under a much weaker regulatory regime than we have now, we have just introduced much tougher regulation on the banks and financial services, much more comprehensive regulation, just this week, reforming the system that we inherited and so unfortunately perhaps the regulatory rules at the time were not strong enough but that’s why I think it’s right that Vince should look under the powers that he has to see if there’s any steps that can be taken.

DM: But it’s a simpler question about fairness, if you look at what happened to RBS when it hit the rocks and then what happened to Fred Goodwin and the loss of his knighthood, there is a parallel and we’ve had it laid out, you’ve been looking at that report for quite a while now and it’s laid out in front of you what happened to HBOS and those at the helm at this point are hanging on to their titles.

DA: Well, as I’ve said, of course it is absolutely right that those people should be held accountable for the mistakes that were made on their watch and that’s why Vince Cable, the Business Secretary, is asking his team to look at under legal powers that he has, what action can be taken. I think I would rather digest the report, allow that work that Vince has commissioned to take effect and act accordingly.

DM: Okay, how long is it going to take digest that report because this is what you were saying yesterday in interviews? It’s pretty clear isn’t it what happened with HBOS by now.

DA: Well look, we’re looking at the report, I’m up here in the Highlands at the moment, I’ve broken a very short holiday to come and talk to you this morning so I’ll certainly be considering it over the next wee while.

DM: Okay, consider this question, you mentioned you have been on a short holiday there in lovely Dornoch, a huge question for the Scottish economy and indeed for the defence of the United Kingdom, the issue of Trident which the Prime Minister made his views very, very clear in view of the North Korean situation at the moment, to say we need a like for like replacement for Trident. That’s not the Lib Dems view, what would you do?

DA: Well we’ve said that we don’t think that a like for like replacement of Trident is the right way forward, we do want this country to continue to have a nuclear deterrent but the idea that we simply should continue with the existing system which was designed for threats that we faced during the Cold War without examining all of the alternatives and understanding if there is an alternative deterrent that is effective but more cost effective, better value for money than this very expensive system over the course of its lifetime and more suited to the threats we face. It would be irresponsible not to undertake that work and that’s why we launched in government a year and a half ago a very detailed review of the alternatives, that’s something that I am responsible for conducting. That work isn’t complete yet but I would hope that everybody who is involved in taking the decisions over the next few years about our nuclear deterrents and of course also having to make decisions about what as a country we can afford, not just in the next few years but in the decades to come. We’ll wait for that report, consider the alternatives and understand that there are different ways of achieving the deterrents that we all want to do without necessarily having to go down the expense of like for like replacement of Trident.

DM: People might ask though why have the review if it seems that both parties are sticking to their existing positions?

DA: Well I can’t speak for any other party except my own and I think that it’s very important, it’s one of the things we committed to do in our manifesto and in the coalition agreement, that we would consider the alternatives. I hope that the review will help to open up a much wider public debate about how we achieve our objectives of nuclear deterrents in the future and how we do so in a way that is more cost effective because as a country the resources we have at our disposal are going to be very stretched for many, many years to come and we need to make sure that we’re not just continuing with the existing system that was designed for the Cold War, without having a proper consideration of the fact that there are many different ways to achieve those deterrents, those right deterrence objectives and we will bring that forward when the review is complete.

DM: Okay, Chief Secretary, thank you very much indeed. Danny Alexander there.