Interview: Danny Alexander on unemployment, the IMF and Scottish independence

After a 70,000 increase in unemployment and criticism of austerity by the IMF, the Chief Secretary to the Treasury insists the coalition is not on "the wrong path".

It’s been said that the Welfare Reform Act is the most ambitious overhaul the UK’s welfare system has seen in 60 years. It was billed as a restoration of the UK’s welfare system to “one that is fair for society” and promised to improve the lives of 2.8 million low income households; however, according to preliminary research conducted by the New Statesman, the Act has actually made the lives of 2.6 million British families worse. So, who did the reforms help?

“Well look, the central purpose of the reforms is to ensure that we have a welfare system in which people are always better off in work than on benefits – and one of the things that we found with the welfare system as it was when we came into government was that an awful lot of people for whom that just wasn’t the case. So, the system was encouraging people not to go into work, but to stay on benefits instead – and there are an awful lot of people who, with the right support, encouragement and incentives can get into work, are capable of working and want to work. There are also a large numbers of people on benefits – 2.8 million people on incapacity benefit, is one example – who had simply been left on that benefit for very many years without the help and support, many of whom wanted to work and couldn’t.
 
And so I think having a welfare system that genuinely means two things: firstly it has to support people when they’re genuinely in need. Secondly, it has to ensure that people are better off in work than on benefit. That’s good for the whole country, because if you have a welfare system that is offering the opposite incentives – that distorts that whole way our labour market works – it means that there’s an awful lot of people who could be contributing to the economy through work who are not able to do so. But of course, you also have to make sure that those people who genuinely can’t work are also properly helped and supported – and so I think the reforms are fair to those individuals for that reason, but also fair to society at large. We’re asking everybody in this country who pays tax to help support the over £200bn a year cost of our welfare system – and at a time when there is real pressure on our resources as a country, we have an additional responsibility to make sure that resources are used in the right way. Therefore, I think that these reforms are true – if you like – to the original intentions of the welfare system as it was designed and set up by William Beveridge all those years ago.”
 
The IMF recently lambasted the British government for its ‘too-much-too-soon’ austerity measures. Is there any validity to such claims?
 
“I think that dealing with the deficit, that reduction to public spending and so on, are absolutely necessary to restore our country back to health. When we came into office, the deficit – which is the gap between what we raise in tax and what we spend – was over £150bn. To put that in a different way, that’s more than the entire cost of running the National Health Service in England, Wales, Scotland and Northern Ireland – it’s just not sustainable as a country to go on like that.
 
But also, importantly, the interest rates that we pay as a country are very important because we pay a lot of interest on that debt, but also it feeds through to the interest rates that people pay on their homes and their mortgages, businesses and so on. By having a policy for dealing with those financial problems – that the people who borrowing the money trust the financial markets – we’ve managed to keep our interest rates very low. That’s good for the economy as a whole; so, my big worry would be if we abandon that and say, ‘we’re gonna borrow even more and spend even more’, that we would jeopardise that credibility, interest rates would go up and that would be very painful for the whole country.
 
I think that where I would say we’re already actually acting on the sorts of things the IMF has said is that we’ve been very flexible in how we respond to changing circumstances. Just in the budget, last month, despite deterioration in the economy’s forecast, we didn’t chase the numbers with even more cuts. We stuck to the plan we had, and we allowed the automatic stabilisers in our economy to operate in full so that when the economy’s going more slowly than people expect, we’re allowing the borrowing to pick up the strain of lower than expected tax receipts – so, welfare spending, unemployment benefits and so on – may be slightly higher than expected. So actually, I think we’ve shown a lot of flexibility, but the basic plan to get our public finances back into balance I think is essential to the future of our economy.”
 
Figures released this week indicated that unemployment amongst Britons jumped by 70,000 in the three months ending in February – reaching an estimated total of 2.56 million. To some extent, do these figures not validate criticism of George Osbourne’s austerity measures?
 
“I don’t think we’re on the wrong path – and of course I think about this a lot, you know? I’m one of those people responsible for those decisions, so of course I spend a lot of time looking at these things and thinking about them and so on. But the conclusion I’ve reached – and the conclusion the government has reached – is that for all the reasons I’ve just explained, the path we’re on is the right one. We’ve got to stick to that path, we’ve got to do even more at every stage to encourage and support British businesses, to invest and create jobs to grow.
 
Actually, I think if you look over the last two and a half years, the record on employment and the number of new jobs being created in our economy is a success story. Well over a million jobs have been created in the private sector over the past 2 years, and the number of people in work in this country is at one of the highest levels it’s ever been in the United Kingdom. If you compare that to similar countries like France and Germany for example, where their growth forecasts are lower, in France the unemployment is much higher. This suggests that some of the things we’re doing are helping.”
 
I don’t believe everything that Ed Balls says, but…
 
“No, you really shouldn’t.”
 
…he’s called the coalition’s income tax changes a “giveaway” for the rich…
 
“No, I think it’s total nonsense – and also, total hypocrisy coming from a Labour party that left us with a tax system that’s so full of holes that the wealthiest in this country could avoid tax left, right and centre. So I think it’s pretty hypocritical, to be honest.”
 
So, does that mean the system is fair for everyone?
 
“I think by far the biggest income tax cut that came through the system in April was that the increase in the tax-free amount that every pays. Everyone who’s working on the basic rate income tax – 25 million people this month across the UK – are getting an income tax cut because we’re putting our own resources where we promised in the Lib Dem manifesto we would do, which is in cutting taxes for working people. Actually, the wealthiest in society are paying more tax now than they ever did when Ed Balls was in government.”
 
The so-called ‘granny tax’ – which will mean that the personal allowance for pensioners no longer rises with inflation – has received almost as much criticism as the removal of the "spare room subsidy". Shouldn't a person’s income increase to match inflation and unavoidable rises in the costs of living?
 
“As we’re increasing the personal allowance for everyone else so much more quickly than forecast – it will be £10,000 next year – we think it is right, and in the long term, a simplification of the tax system to have the same tax for everybody. But for pensioners, I think we have made some important changes so the rate of increase in the state pension now is greater than it’s ever been before. So, previously it was done by inflation – and that led to derisory increases in previous governments like under Gordon Brown’s 75p a week increase at one stage. But we’ve put in place a triple lock that says that we will increase it every year by inflation, earnings or 2.5% – whichever is the higher. And so, the basic pension that everyone gets is going up much faster than it would have done if we’d left things previously. Only about half of pensioners pay income tax, so I think that’s a good balance.”
 
A couple of weeks ago, cities across the nation took to the streets in protest over the ‘bedroom tax’ – the biggest by far taking place in Glasgow, with an estimated 3,000 protesters. As tensions increase in the run up to the Scottish independence referendum, do you not think that some of these austerity measures will push voters into the hands of the SNP?
 
“No I don’t. I think that the vast majority of people in my constituency and elsewhere are better off as a result of the tax and benefit changes that are coming through tis April. The income tax in particular is a real help especially in areas where people’s incomes are lower – such as in the highlands, where the incomes are lower than the rest of the country – those income tax cuts will make a real difference, as will the acts on fuel duty and in other areas. And look, I think the biggest thing that everyone in Scotland is facing is the debate on independence, and I think that the vast majority of Scots of all age groups and all backgrounds recognise that we’re better together as part of the UK. People see the Nationalists for what they are – which is an organisation that has a one-track mind and want to break up the United Kingdom. That’s the wrong thing for the country, and so I look forward to being successful in that campaign.”
 
Nash Riggins is the politics editor of Brig Newspaper
Chief Secretary to the Treasury Danny Alexander arrives at number 10, Downing Street ahead of a cabinet meeting. Photograph: Getty Images.
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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.