On the Politics Show, Sunday 12 October 2008, Jon Sopel interviewed The Leader of the Lib Dem Party, Nick Clegg.
JON SOPEL: We're joined in the studio by the Liberal Democrat leader, Nick Clegg. Mr Clegg, thanks very much for being with us.
NICK CLEGG: Thank you.
JON SOPEL: The centre piece of your conference which was only three or four weeks ago...
NICK CLEGG: Seems an age ago.
JON SOPEL: It does seem an age ago, was the idea that there should be tax cuts. Doesn't that policy just seem out of date, needs to be ditched in view of all that's happened.
NICK CLEGG: Oh, it's more necessary now than ever before. I mean let's be clear, I've heard some people say that we have to increase taxes as we head in to a recession, nothing would be a greater act of madness than adding to all troubles that families and ordinary people are already facing, but also forcing them to pay more tax. I think we need to cut taxes for the vast majority of ordinary tax payers. Firstly, because it's fairer, people who have earned a lot of money can pay expensive accountants to run a coach and horses through the tax system.
There are lots of loop holes for them. Close the loop holes, give the money to people on ordinary incomes. Secondly, because it gives them some extra money to spend, which we need, we need people to spend a bit more money on the high street as we head in to a recession. And thirdly, and I think this is a very important point, which has really only emerged in recent days. If we want the public to support the government and all the politicians of all parties who are saying we should be committing billions of pounds to bale out banks, we can only sustain public support for that, by showing that we're on their side too.
JON SOPEL: But how do you afford tax cuts at a time like this.
NICK CLEGG: Well, I'm just giving you a very specific way in which you could do it. You could close the loop holes, the multi billion pound loop holes, which are simply unfair.
JON SOPEL: Stamp Duty for example. Okay, I'm sure there are loop holes where people buy properties from companies off shore. It's small beer compared to what we're talking about.
NICK CLEGG: The government estimates that they are losing around two billion pounds a year in avoided Stamp Duty by big companies in this country. There are other things. We pay, as tax payers, all of us, twice as much in tax relief to the upper 10% of earners in this country when they make pension contributions and the tax relief enjoyed by everybody else.
That would gain us about seven billion pounds. You could provide, you could close that loop hole and give it back directly in tax cuts to people who really need it, when they're worried about whether they're going to keep their jobs and frankly, whether they're going to have the money to have the Christmas they were planning this December.
JON SOPEL: People may not be shedding tears for them, but aren't these people at the very top, the ones who are losing their jobs first and losing all their fortunes.
NICK CLEGG: I think what everybody wants to see as we head in to a recession, is a tax system which is fairer, which is clearer. You see this is one of the things which has gone wrong in the banking system, is that we have a web of rules and tax rules which are so complex now, that they've actually hidden a lot of the liabilities. And I think what we need is a tax system for people as well as banks, which is clear, transparent, fair. And of course boost spending at a time we want that, because the economy is heading in to a recession.
JON SOPEL: Does it matter what debt balloons to then.
NICK CLEGG: I think we just have to accept that debt is going to rise and that the key priority is not to add insult to injury and sort of develop an economic strategy of masochism where we try and straighten, tighten belts, when we actually need to allow the economy to grow. Growth is what we need and growth you deliver in part by reducing interest rates, that is necessary. In part by getting money flowing in the banking system again, which is what the government announced, with our support last week. And in part by putting money back in people's pockets.
JON SOPEL: So it doesn't matter what level debt reaches.
NICK CLEGG: I think over the economic cycle, over the cycle, of course you need to bring debt back under control. But now the priority is growth.
JON SOPEL: And if you put money back in people's pockets, isn't the instinct at the moment not to go to the High Street and think, oh I'll have a new one of this - they're going to put it in a bank because they feel insecure.
NICK CLEGG: All the evidence from past recessions is that if you give money back to people who have already done quite well, who are well off, yes, they just pocket it in savings because they're feeling a little bit worried about the future. If you give tax cuts, which is what we want, fair tax cuts for people on low and middle incomes, all the evidence is that they do spend more of that money than people do who are already much better off.
JON SOPEL: Let's talk about the banking crisis and the correct response of government because we've heard the rescue package unveiled last week - you've talked about this short term bonus driven culture. What is it.
NICK CLEGG: It's a culture which gives people bonuses for short term deals rather than for business activity which is good for the long term health of a bank or a company.
JON SOPEL: And how do you do anything about it.
NICK CLEGG: My own view, and this is my own suggestion, is that we should stop bonuses altogether, certainly the short term bonuses being part of the package of pay and remuneration that directors get at Board level in banks. Why? Because they are the people who set the business strategy, which are followed by all the other people in the bank. By all means pay them a lot of money, give them a company car, give them free entry to their local golf club, but don't give them incentives, which is what these bonuses are, which distort their judgments, distort their decision making.
JON SOPEL: Isn't capital very very mobile now. You do that here and those banks open up somewhere else.
NICK CLEGG: I personally think we're now moving in to an environment where this crisis is so great and is so global, it's touching everybody, whether it's Asia, America or Europe, that we will now move to totally different era, in the relationship between governments and banks and also public attitude towards banks. You have to accept that, I think the Conservatives would say, Oh why don't they just stop bonuses for a year, that's not good enough. We need to change the culture at a much more fundamental level.
JON SOPEL: How does government enforce its will because you know, you've now got government taking stakes in major banks. Should there be someone representing the government on the Board of these companies. How do you see it.
NICK CLEGG: Well my own view is that the government, I'm sure this is the conclusion they're arriving at themselves now, if they're going to invest billions of pounds of our money in to part owning these banks, if for a temporary period of time, during that period of time, they should have in my view, a representative, a non executive director on the Board, or perhaps even better, on the committee, the so-called remunerations committees, which pay people at the highest levels in these banks. So there is some leverage, real leverage in person, not just in terms of the capital invested, in the way in which people are paid.
JON SOPEL: So you effectively have, almost a government minister there saying, no they should get that salary, not that.
NICK CLEGG: I think for a temporary period of time, when the government becomes a major shareholder in a bank, that yes, the government on behalf of the public, should have the rights that a lot of shareholders do. And that means being represented on these committees.
JON SOPEL: And one of the things you demanded is that banks should be banned from withdrawing credit lines from small businesses. No matter how badly run that small business is.
NICK CLEGG: No, actually I think I said in the context of - of course, of needless removing of credit, of loans. I think that would be insane at this time. If you are putting a lot of money in, as we are, the tax payers - in to these banks we want - we're doing that for a purpose, not just to prop up 'x' or 'y' bank. We're doing that so that people's homes are not repossessed and people's companies aren't pushed to the wall, when there's no real need for that to happen. That is why I think the government is quite right in saying, look, if we give you this money, in return, you should not repossess homes, other than in the absolute extreme cases and you should certainly not call in your loans on small companies.
JON SOPEL: But shouldn't you call in loans. This is what happens in a recession, it's Darwinian, survival of the fittest.
NICK CLEGG: The fittest are going to go to the wall if we're not careful, that's the problem, that there are very fit companies and people who don't deserve to have their homes repossessed who are now under pressure from losing their homes and losing their companies. That is going to topple from a recession in to a total slump.
JON SOPEL: Okay, we must leave it there. Thanks very much for being with us on the Politics Show.
END OF INTERVIEW WITH NICK CLEGG
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The Politics Show Sunday 12 October 2008 at 12:00 BST on BBC One.
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