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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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland