Murnaghan 8.01.12 Interview with Danny Alexander on executive pay

ANY QUOTES USED MUST BE ATTRIBUTED TO SKY NEWS, MURNAGHAN

DERMOT MURNAGHAN: The government has signalled its intention to give shareholders binding votes on executive pay as part of measures to deal with excessive salaries. The Prime Minister has said the market for top people isn’t working and needs to be sorted out. In a moment or two I’ll be speaking to the Chief Secretary to the Treasury, Danny Alexander, about that but just to alert you to our Twitter experts watching the discussion, they are Vincent Moss, political editor at the Sunday Mirror, Kevin Schofield, the Sun’s political correspondent and editor of City AM, Allister Heath. They provide their reactions via Twitter, you can read those on the side panels and you can follow on our website, skynews.com/politics and we of course want you to join in, use the hashtag #murnaghan to do that. Well let’s say a very good morning and a happy new year to the Chief Secretary, Danny Alexander.

DANNY ALEXANDER: Good morning, happy new year.

DERMOT MURNAGHAN: This idea of executive pay and trying to do something about it, as the Prime Minister has said this morning, it is a market, can you rig a market to be more fair?

DANNY ALEXANDER: Well this is something that we as Liberal Democrats have argued for for a very long time and it is very important now that the mood is for change in this area and it is something that you can do something about, by making the system more transparent, by giving shareholders who are after all the owners of these companies, binding votes. You can stop the money-go-round that exists in many remuneration committees where you’ve got members of one company’s board scratching the backs of another and seeing this perpetual rise in pay at a time when millions around this country who work hard, who play by the rules, are seeing their pay constrained, are seeing prices go up. It is just wrong that you have this group of the population who seem to think they can be totally disconnected from the financial reality that everybody else experiences.

DERMOT MURNAGHAN: We have seen those figures, the increase in executive pay compared for instance to the increase in profitability in some, particularly in FTSE100 companies, but just what do you do, what more powers do you give to shareholders? This presumably would require a change in company law.

DANNY ALEXANDER: Well Vince Cable will be setting out the details of this in the next few weeks, we’ve been carrying out a call for evidence, listening to views from business, from shareholders. I was very struck just before Christmas by the strong language from the Association of British Insurers who represent some of the largest pension funds, who have controlling interests in a lot of companies and banks too, where high bonus payments have been a serious concern over the last few years, saying themselves they want to be able to exercise more influence. We’re making those votes binding, that’s something that you can do that can make a real difference to corporate behaviour in this area, likewise transparency, so that the amounts people are paid is available transparently to shareholders, to the public and so on. Again that can act as, if you like sunlight is the best disinfectant, even MPs don’t set their own pay any more and we need to see a bit of that kind of spirit going into the boardroom too.

BREAK FOR INTERVIEW WITH WINNIE MANDELA IN SOUTH AFRICA

DERMOT MURNAGHAN: I’m in the studio with Danny Alexander, the Chief Secretary to the Treasury and we were both listening to that interview, an interesting – and obviously incredibly different circumstances between our countries but what Winnie Mandela was saying there about a moral compass in politics and what you’ve been talking about with me this morning about trying, I suppose, to see that imposed in the boardrooms in terms of excessive corporate pay, empowering shareholders we discussed but why not go one step further as we’ve heard in the past from Vince Cable especially, and empower the employees? Shareholders are in a way passive in a company, the employees create the wealth, why not get them into the boardroom to talk about executive pay?

DANNY ALEXANDER: Well I think firstly you’re right to say that this is an issue about fairness, it is an issue that is very important for the first half of this year, a time when this country knows and people understand and I think in the main support the idea that we have to continue with the austerity, as we said last year, for another couple of years till 2017 and at a time like that you have to be making sure that those who have the most are making the biggest contribution and that’s …

DERMOT MURNAGHAN: But the specific question was about employee representatives on remuneration committees.

DANNY ALEXANDER: I am coming to that but it is in a sense therefore a kind of moral point, it is something that Liberal Democrats have argued, Vince Cable and I and Nick Clegg have argued for a very long time. It is a very good thing now that other political parties are moving on to that space but the idea of employees being involved in remuneration committees, that’s something that will be looked at in the context of this review, I certainly wouldn’t rule that out. I think too an employee ownership model for companies is something that can make a real difference. We see many employee owned companies in this country now, the John Lewis Partnership reported very good results just in the last few days, as an example of an employee owned business where employees themselves have a stake in, shape the direction of the company and get a share of the rewards from it. That is a good model for companies in this country and it is certainly something that we wish to promote.

DERMOT MURNAGHAN: On a similar issue, there is also a moral dimension to your consideration of more general tax avoidance measures applying to companies and very rich individuals who may legally not pay very much tax but you think there could be a way legally of saying more or less to them, come on, fair’s fair, pay a bit more.

DANNY ALEXANDER: It is something that this coalition government has taken very seriously since we came into office, actually much more seriously than the previous Labour government did, and we have taken many steps to tackle avoidance and tax evasion too already but the idea of a general anti-avoidance rule, as it’s called, which would be a rule that set out that the most egregious tax avoidance schemes were simply against the law, gives a very strong steer and greater freedom to the tax authorities to deal with those things, is something which we have had a very compelling independent report provided to the Treasury by Graham Aaronson and we’re considering now whether we want to go forward with that. It’s something we will make further statements, as we will on other tax matters, in the budget but it is certainly something as Liberal Democrats we have argued for for a long time and this report is a very, very strong and compelling case for that sort of innovation to further make sure that in these difficult times people pay the tax that they owe and that’s a very, very important thing.

DERMOT MURNAGHAN: Some people do it voluntarily, some very rich people, I’m thinking of Warren Buffet’s comments that you’ll be aware of in the United States last year. It has emerged this morning that Tony Blair, the former Prime Minister, that companies associated with him in the two years to March 2010, something like £20 million and have paid less than half a million pounds in tax. He is a UK tax resident, it’s all legal but morally shouldn’t someone earning that vast amount of money pay more?

DANNY ALEXANDER: Well it would be wrong for me as a Treasury Minister to comment on any individual’s tax affairs I’m afraid, I don’t know the situation of this case and frankly nor should I, that’s a matter for the tax authorities. What I of course would say is that everyone should pay the proper amount of tax that they owe, that’s the reason the government has invested more money to provide HMRC with more tax inspectors, new rules of the sort we’re talking about to give them more power. We’ve just appointed another 2000 people to work in tax compliance for high value individuals to try and make sure that those people’s tax affairs are in order and a minority of those people who don’t pay their proper share of tax are scrutinised properly.

DERMOT MURNAGHAN: You say you can’t comment on individual tax arrangements but your leader, Nick Clegg, has said there is a wealthy elite who can pay an army of tax accountants to get out of paying their fair share of tax. It’s not about the law is it, it’s about the circumstances wherein and this issue of those with the broadest shoulders paying their fair share.

DANNY ALEXANDER: Well that’s exactly why as a government and as a Liberal Democrat in the Treasury I have and we have been arguing and delivering a much greater focus on ensuring that people pay their fair share of tax. The extra £900 million that we invested in HMRC to tackle this issue, the additional prosecutions for tax evasion that we are promoting, the consideration of a general anti-avoidance rule, the new arrangements we have put in place with other countries which are tax havens – all of those things are designed to make sure that this country receives the tax that people should be playing as part of their obligations as being citizens of this country.

DERMOT MURNAGHAN: And is the price for this in terms of coalition dynamics, your idea, the Lib Dems idea for a mansion tax been kicked into touch, at least for this parliament?

DANNY ALEXANDER: Well one area where avoidance is rife is in the Stamp Duty system and you do see multi billionaires from around the world coming to London, buying up properties, not paying a jot of Stamp Duty because the transactions are carried out through international companies – that’s something which is just unacceptable and it is an area where the Chancellor signalled in the budget last year that we were doing further work. We are doing that work and we will be taking further steps to make sure that people who have high value properties and are trying to dodge the tax system, do pay their fair share. That’s an important part of this push to make sure that we get the proper amount of tax from the wealthiest in this country so that they are making a proper contribution, given that every single person in this country is making a contribution to sorting out the mess that we inherited and with the austerity going on for longer, it’s very important that that’s seen to be shared fairly across the population.

DERMOT MURNAGHAN: Turning now to your own patch in terms of your constituency and of course your country of origin, Scotland, the Prime Minister has been talking this morning about a referendum on independence, Alex Salmond and the SNP leading that. He wants to move things forward, to have a decisive referendum fairly soon, Alex Salmond is talking about perhaps one, an indicative one taking place in and around 2014. The Prime Minister also said he is not the person to campaign actively against this, given that the Conservatives have only got one MP in Scotland and he of course is not from there, he’d like to see people like you step up to the plate and defend the union.

DANNY ALEXANDER: Well I believe very strongly that Scotland is better off, that there are more opportunities for Scottish people within the United Kingdom. It is the longest standing, most successful alliance between countries in the history of the world and to seek to tear that apart at a time when across the rest of the world countries are trying to come together to support their own prosperity, to support their own populations, just seems to me to be totally wrong. It is something I’ve been saying throughout my time as a government minister. I think there is an added feature now for the people of Scotland which is the delay, the uncertainty that’s created by the knowledge that there has to be a referendum, that there will be a referendum because that’s what Alex Salmond has said that he wants, that is causing businesses to think again about investment, to wonder what the situation is going to be like in two, three, four years’ time. We’ve seen for example independent reports from banks looking to advise their clients on investing in renewables in Scotland advocating caution. Scotland cannot afford, literally cannot afford, a long period of dithering and delay from Alex Salmond because what that will cost is jobs and growth in the Scottish economy. That’s why the argument that says that the Scottish government should get on with calling a referendum, after all these arguments have been going on for 30 or 40 years, people have known the SNPs arguments since Winnie Ewing won a by-election in the 1960s. It shouldn’t take all this time to getting round to calling a referendum given the economic damage that that uncertainty is causing.

DERMOT MURNAGHAN: Just to move things on a bit, one of the reasons in Scotland when Mr Cameron refers to one Conservative MP there – and for a while not one at all – is of course the Thatcher years, much discussed, and we know the strong feelings about Lady Thatcher in Scotland, she’s much discussed at the moment in terms of this film The Iron Lady and discussions taking place as to whether she, given her contribution to British society and the economy, should when she does pass have a state funeral. What’s your view on that?

DANNY ALEXANDER: Well I haven’t seen this film but you’re right to say that …

DERMOT MURNAGHAN: But should Lady Thatcher have a state funeral? As a Liberal Democrat what’s your view?

DANNY ALEXANDER: You are right to say that Margaret Thatcher’s legacy is one that looms large over British politics today, it very much looms in Scottish politics too. That’ll be a matter to be considered in due course, I know it’s a debate that’s been going on but I think the important thing in these debates that we’re having about fairness in executive pay, about the situation in Scotland, about the economy situation for young unemployed people particularly, is that we don’t make the mistakes that were made in the 1980s when Margaret Thatcher was Prime Minister. Many good things were done in this country during those times but …

DERMOT MURNAGHAN: So she made mistakes therefore presumably in your book should not be accorded the honour of a state funeral.

DANNY ALEXANDER: I’m not going to get into that issue at this time, that’s something that no doubt will be properly debated in due course. I think that as a country we are facing a very challenging economic situation this year and over the course of the next few years where we’re having to constrain the actions of a wealthy elite who seem disconnected from that reality, when we are trying to make sure that young unemployed people are not blighted by long periods of unemployment as they were in the 1980s, that the lessons we have to learn in not making those mistakes are ones that we do learn and are learning as a coalition government.

DERMOT MURNAGHAN: Chief Secretary, thank you very much for your time. Danny Alexander there.