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DERMOT MURNAGHAN: Now for the past five years the Lib Dem MP, Danny Alexander has been at the heart of government as Chief Secretary to the Treasury, he’s been driving economic policy alongside the Chancellor George Osborne but there is a good chance, quite a chance he’ll lose his seat at the next election as part of the predicted Liberal Democrat wipe out in Scotland.  The party unveiled more economic plans too this week and they say there is a fairer way of distributing the pain of austerity but will it be enough for him to hang on to his own seat?  Danny Alexander is Liberal Democrat MP, Chief Secretary to the Treasury as I said and a very good morning to you, Chief Secretary.  I want to get to on to that in a moment but we’ve just heard from the Chancellor this morning about the Treasury’s pensioner bond scheme being extended.  Enormously successful, enormous demand and it gives a good tax free rate of interest, what’s going to happen?

DANNY ALEXANDER:  What we’ve decided, George and I, is that we are going to make sure that these bonds continue to be available for another three months so until the middle of May.  We haven’t yet reached the full level of subscription for the initial £10 million that we set out, we don’t know that we’ll reach that but what we wanted to make sure, given that we made clear when we started that this was a scheme that was going to run for several months, that that will be the case and so if there is additional demand over the next few months that will be met. Of course there are a lot of people who pitched in for these bonds straight away but there will be others who were waiting a few weeks or waiting a few months or were relying on the fact that we’d said it will be available for a few more months and so that’s what we are just making clear today.  So there’s not that much new here but it is obviously important for the pensioners who do want to take up these bonds that they know that they will be available.

DM: They’ll have more time to do it because there were some difficulties with the website weren’t there, due to the size of demand?

DANNY ALEXANDER:  There were, yes, that’s right.  

DM: But the ceiling of £10 million worth, that stays, you’re just extending the timescale when you might be able to get in?  

DANNY ALEXANDER:  If the demand is there to take us over the £10 billion then we’re willing to go over the £10 billion, we’re not setting that as a cap any longer.  I don't know that there’ll be demand to cross that level but if there is, we will meet it.  What we don’t want – and you’re right, there were some pretty serious problems with the website and so on, people who maybe weren’t able to get through at that stage, we don’t want those people to be cut off for reasons of administration going wrong.  

DM: Okay, well let’s look at the economic landscape beyond the next election if you are returned to parliament, some pretty deep cuts, savings, tax rises to come, £30 billion worth is the estimate.  The Liberal Democrats feel, and this is how you differ from your coalition partners, that there is a fairer way of doing this and you can’t ignore that tax rises are needed.

DANNY ALEXANDER:  I think there are two big differences between ourselves and the Conservatives.  The first is that we both want to balance the books by 2017/18 but the Conservatives want to carry on cutting beyond that, far beyond what is necessary, another £30 billion of cuts on top of the 30 billion necessary to balance the books.  That’s a kind of ideological raid on the public services which I think is totally wrong and unjustifiable and then before that, there is a question about the balance.  In this parliament we have raised some taxes as well as made significant savings in public spending, that’s to ensure that everybody in society makes a contribution to dealing with this huge challenge.  As a party that wants to have both a strong economy and a fair society, we Liberal Democrats think that there should be some tax rises targeted on the wealthiest as part of the equation for finishing the job.  

DM: But what are those tax rises going to be because you have already said, unlike Labour, that that top rate tax, the tax rate for millionaires as Labour term it, that’s not going to rise so what else can you do?  

DANNY ALEXANDER:  Well earlier this week Nick Clegg and I set out some of the ideas, we haven’t published them all yet …

DM: But the ones we know, so no increase in VAT.   

DANNY ALEXANDER:  In terms of the headline taxes that most people pay, we will not be increasing the rates of income tax, national insurance, VAT, we’re not going to put up corporation tax either, we want to support businesses in this country and not attack them as the Labour party is but what we do want to do, for example for people living in high value properties, there’ll be additional bands on top of council tax for homes worth more than £2 million.  

DM: Are you stopping calling that the mansion tax then?  That’s a different way of slicing it from Labour.

DANNY ALEXANDER:  Well I’ve done quite a lot of work on this over the last couple of years to look at precisely how you could make it work in practice and the simplest and fairest way is to add additional bands on top of council tax.  So at the moment if your home is worth, in Central London, let’s say £700,000, you pay the same council tax as somebody in a £70 million home.  That isn’t fair and so we’ll add a number of additional bands above £2 million to make sure that you continue to pay more in terms of that annual levy than you do at the moment so that’s one thing.  People who are non-domiciled for tax purposes in the UK, we will increase substantially the charges …

DM: Do you think there’s more to be done there?  

DANNY ALEXANDER:  I think there’s quite a lot more to be done.  In the end of course, people who are non-domiciled can elect to domicile themselves in the UK and pay taxes in the normal way so I think that’s another thing that is fair.  We obviously have said that we will get rid of this married couple’s tax allowance that the Conservatives want to introduce, we don’t think it’s right to have discrimination of that sort in the tax system but I guess the main tax policy that we’ll be fighting that election on is going further on the income tax cuts for working people.  You’ll know that the tax free threshold now is £10,000 …

DM: So these are spending commitments.  Where are you getting the revenues in, because you’ve ruled out that top rate of income tax, you’ve ruled out VAT and you talk – I saw you and Nick Clegg talking about it – the old sore, tax avoidance clampdown.  Well you’ve been talking about that for five years, haven’t you got as much as you possibly can by now or is there more to go for?

DANNY ALEXANDER:  We haven’t just been talking about it, we’ve been acting on it, we’re raising tens of billions of pounds more now than we were when we started.  Frankly the Labour party has left a tax system that was so full of holes, so full of avoidance opportunities that there’s been a vast amount of work to be done to get there but HMRC tell us that we can go further.  In particular we’ve been leading as a country this international project to tighten up the rules that govern where multi-nationals pay their tax.   Those rules were first written in the 1920s and …  

DM: A lot of territories, they pay their taxes and you’ve sat on it, as Mr Miliband pointed out, they are British overseas territories and a lot of them are getting away with it.  

DANNY ALEXANDER:  Well Mr Miliband has got a cheek given that for 13 years he was in government in the Treasury and elsewhere and …

DM: Okay, but what about the last five?  

DANNY ALEXANDER:  Well in the last five years we have put in place new rules for these territories, they’ve signed information exchange agreements with the UK, with the United States, with other countries.  They have signed up to the new standards of tax transparency that the UK led during our presidency of the G8.  We are pushing internationally, leading the push for this idea of a Register of Beneficial Ownership, so there has been a massive change in the tax behaviour of these territories because as a Liberal Democrat Minister in the coalition government we have pushed them to do so.  Mr Miliband as usual is slow on the uptake, he is a Johnny-come-lately on this matter and frankly, like every other statement of economic policy from the Labour party, they should start by apologising for the fact that they did nothing when they were in office.

DM: All right, a specific question on squeezing more out of the wealthy.  As I say, you have ruled out that high rate of income tax, what about this tax-free lump sum on large pensions, it costs the Treasury billions, is that something you could restrict?  

DANNY ALEXANDER:  No, the tax-free lump sum is an important part of our pensions architecture.  What we would restrict in pensions is the total amount, the total size of the pension pot that you can accumulate over your lifetime with tax relief.  So at the moment you can load a pension pot worth up to £1.25 million and all of that, all of your contributions are subject to tax relief.  We’d lower that to a million pounds so you’d have a million pound pension pot that would have tax relief, beyond that you’d have …

DM: But if you have got it in there, if you are very wealthy, you can take £250,000 tax free, that’s fair is it?

DANNY ALEXANDER:  I think that is fair, it’s been part of our pensions tax system for a long time, I don't think it would be right to change that but I think it is right to say that for the one or two percent biggest pension pots you’ll no longer get tax relief for that amount of savings.  

DM: Okay, well you have obviously been thinking in great detail, as we know you have over the last five years, about the state of the economy and the various plans there, is it all going to come to nought though Mr Alexander in that you might be sitting at home twiddling your thumbs if you don’t have a seat?  That’s what the polls are telling us, the SNP are going to blow you out of the water.  

DANNY ALEXANDER:  I don’t think that’s likely to happen.  Of course in my constituency, as in many constituencies across the country, there is a real battle going on but I think a combination of my record, making sure that we have both a strong economy and a fair society, delivering many things for my voters in the Highlands of Scotland and I think most Scots, even many who voted yes, don’t want to see Scotland to go back into the referendum independence debate again and yet many of the nationalists are saying they see this election as a springboard to independence. So that’s the real choice.

DM: But what is the planning in the high command of the Liberal Democrats with some predictions that your leader could lose his seat as well and also the number of seats that the Lib Dems hold could be halved, what are you discussing there about how you handle what you expect to be some fairly difficult coalition negotiations after the next election?

DANNY ALEXANDER:  Well I think the only people who will be left with egg on their faces after the election are the pundits who are predicting all these seats being lost.  I think as a party we will do a lot better in the election than anyone is currently forecasting because of course when you have a situation where the Conservative party are lurching to the right, Labour are lurching to the left, actually most people want the recovery to continue, most people want the country to continue to grow and have that balance between fairness and economic strength.  Only the Liberal Democrats are offering that and I think we’re the rock of stability on which this recovery has been built over the last five years and I think people will want, as we get closer to the election, to search out that stability and not go for the destabilising effect that you would see with a majority Conservative government or a majority Labour government.  I think as we get closer to the election more and more people will see that the reason why we have a strong economic recovery is because the Liberal Democrats have been leading economic policy for five years and they want us to continue.

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