We brought you a taste of the Voice’s exclusive interview with the deputy prime minister yesterday. Here is the full interview, covering the economy, welfare reform, pensions, Cleggism, our approach to the manifesto, Kung Fu Panda and Clegg’s cooking.

Nick Thornsby: What’s your take on where the economy is now, three and a bit years into the coalition?

Nick Clegg: My overall assessment is that it is healing. There are signs of confidence slowly seeping back into the sinews of the economy. Some of the latest data on consumer confidence are better than they were. Bank lending is improving, particularly in the property market. Employment has held up remarkably well. A lot of people who are in employment but obviously on low pay, which is an issue, but at least they are in employment. Over a million and a quarter private sector jobs [have been created] and there is a sense of macroeconomic stability, that we stuck to the plans that we announced in 2010 — mainly that we are going to deal with the deficit and repair the banks and allow monetary policy to be very innovative. But I like to think that that stability is not a dogmatic form of stability, so where we saw that it would take longer to get the job done, instead of chasing our tail we gave it [the deficit reduction plan] a bit longer.

So that’s the sort of good side of it.

Of course the other side of it is that the banks are still deeply damaged. There clearly is a problem in the transmission mechanism of getting money into the hands of small and medium sized enterprises, which is one of the reasons why Vince quite rightly is concentrating heavily on this business bank. The squeeze on living standards — in my view one of the biggest body blows to the British economy over the last two or three years was one that often you don’t hear that much in discussion programmes and the news and that is this spike in inflation back in 2011 to 5.2%. That’s very harsh, very regressive. We still have this lurking uncertainty about what’s going to happen in our European hinterland, in the Eurozone. We’ve still got a massive deficit to pay off, which is still one of the largest in Europe. And so the recovery has still got someway to go.

We need to still see through long-term solutions for instance to energy costs and energy prices both for households and businesses, which have a big effect on the performance of the British economy. We need to do more to address that layer of persistent youth unemployment that’s emerging, I think, as one of the biggest social problems facing developed economies across Europe. So there’s a long way to go, but I do at least feel that there is a sense that there is movement and it’s movement in the right direction.

NT: Can I just ask you about one of the things you mentioned: lending for mortgages? Funding for Lending is now by all accounts having a big impact, but isn’t there a problem in that that is focussed on demand, and if you simply focus on demand and not supply you simply push up prices?

NC: Absolutely. I couldn’t agree more. If all we did was boost demand all we would be doing is storing up another bubble which would then burst with all those awful consequences later, which is why it’s very important to remember that this big initiative that we’re rolling out now called Help to Buy has two components; a demand and supply side to it. The mortgage side of it actually only comes into effect slightly later. The supply side, which is in effect basically the state taking a stake in a newly built house, is already starting, and the housebuilders privately are already telling us that they think it is going to have a significant effect on their house-building plans. And if you like the guarantee that we’re not just going to store up problems for the next generation like previous generations did is that we’re giving someone else — the Financial Policy Committee [of the Bank of England] — the right to basically switch it off after three years if they feel that that balance between demand and supply is wrong.

But I totally agree with you that it would be real folly to simply go for easy wins on boosting supply of mortgages that doesn’t lead to supply of new housing. It’s probably one of my greatest frustrations that many of the levers that government can pull in housing can take a very long time to feed through. I’m like a stuck record round the cabinet table. I’m constantly saying to George Osborne and Danny Alexander, “what is happening to the Treasury guarantee”, which is worth £10bn. One of the debates in policy circles has been around borrowing for capital, well we’ve got on the table already £10bn just for housebuilding alone, and then another £40bn for infrastructure investment generally, which the housebuilders tell me privately — the housing associations in particular — can have a dramatic effect. Getting it off the ground, the gap between intention, announcement and delivery is quite significant. I hope — but experience has taught me not to be totally confident this is going to happen — what you’ll see over the next few weeks is some announcement on how those guarantees will now operate, which will then be taken up by housing associations in a way which should lead to significantly more affordable homes being built.

NT: Turning to the issue of legal aid, do you agree that the backlash against Price Competitive Tendering and the further proposed cuts from the legal aid budget have been of a different magnitude to the usual protestations? It’s not just barristers speaking out, it’s judges, it’s legal aid firms, even the Attorney General’s own panel of lawyers.

NC: I accept that on two particular areas there has been a very strong reaction from a very wide range of people and actually in many ways the thing I have been most struck by is decent, hard-working high street lawyers in my own neck of the woods in Sheffield who are not fat cat QCs — far from it: these are really decent people whose heart and soul is in the work they do — who tell me two things that they are particularly distressed by. First that the plan as it’s presently crafted would remove the choice of their clients to move from one lawyer to another.

NT: It seems perverse at a time when we’re giving people more choice in their public services that we would reduce it in another area.

NC: Well you could say it is perverse that a government with Conservatives in it is reducing public choice rather than increasing it. That’s the first point they [high street firms] make.

The second point is about replacing what is a highly fragmented market of providers with one which is basically organised around fixed contracts administered by bureaucracy in London. Obviously they have a self-interest in saying they think might lose out in that but more generally they imply that would damage quality.

So I think on choice and quality I’ve listened very carefully to what’s been said. Chris Grayling and Tom McNally to be fair to them have been very open about the fact that they have to make the savings — around £220 million — but they’re not dogmatic about how that saving can be made, if the industry can show them how the saving can be made in ways which are considered to be less offensive or disruptive.

The consultation as you know has just closed. I will shortly be asking Chris Grayling and Tom McNally for an update on what the response to the consultation has been, which I suspect will reflect the a lot of the criticisms I’ve just talked to and then we’ll look at it.

The only straitjacket on all of this unfortunately is the need to yield about £220 million or thereabouts worth of savings in legal aid in criminal cases, but I can’t stress enough if on the back of the consultation we can see that there are alternative ways, less disruptive ways, less unpopular ways if you like of delivering that, there’s no ideological attachment in the coalition government per se to those particular measures.

There is unfortunately a financial attachment, if I can put it that way, to delivering savings. So, you know, I have engaged with this a lot as a constituency MP and I have been struck with the strength of feeling.

NT: On the upcoming spending review, you’ve said that on welfare there shouldn’t be any more cuts at the bottom unless there are serious reductions to the welfare received by the wealthiest. Isn’t the problem with that that it’s implied that you will accept more welfare cuts to the most vulnerable, the least well-off when we’ve reached a stage where really we’ve cut as much as we can from that end?

NC: Well, I’d make a distinction. I certainly think that just wilfully taking from the poor is a wholly regressive thing to do if it’s not delivered in a way which in my view should be the guiding spirit of any liberal welfare reform, which should be to enhance the ability of people getting into work, and reducing people’s dependency where you can. So I don’t think any Liberal Democrat should be hostile to the idea that we have future reforms which increase people’s ability to get into work.

All I’m saying is that given that of the £700bn that we spend as a nation on public spending, about £200bn of that is welfare and pensions. The idea — and even the Labour Party is now coming round to this view — that you can just say you’re never going to look at that £200bn in the round seems to me to be unrealistic, but it needs to be done in the fairest possible way. In terms of some of the individual benefits like winter fuel payments and TV licences, cutting them is not going to happen this parliament because we put it into the coalition agreement and we should absolutely not be reinventing the coalition agreement, but of course the spending round as you know actually relates to a period beyond that, and that’s why I have been quite outspoken in saying that we can’t just take this off the table. So I don’t think it is plausible to say that as Liberal Democrats we will never entertain any further welfare reforms, but I would apply two measures to it: are you doing it in as rounded a way as possible, so that you’re dealing with the top before you deal with the bottom, but crucially are you introducing measures which enhance the incentive to work.

My own view is sometimes that the Conservatives have sometimes got a bit of a tin ear on this. The public want welfare reform, but they want it for the right motives. I don’t actually think that the public, and certainly the people we are in politics to serve, I don’t think they like it if they feel that there is a note of retribution or callousness in our approach to welfare reform. And that’s why I always think it’s very important to demonstrate that welfare reform has a purpose, particularly related to getting people into work.

NT: Is it important that we as a party, and in fact the other parties given the increasing likelihood of coalition governments in the future, have clear red lines ahead of the elections?

NC: One of the many things which was so sad about the tuition fees issue is that it actually obscured something that we did which was highly innovative in our manifesto in 2010 [to have four clear priorities on the front of the manifesto], and in fact I remember personally insisting on this because I anticipated there might be circumstances in which we had to be quite clear in drawing a distinction between policies which would be real priorities for us and those by definition which are contingent in their delivery on coalition negotiations. The controversy around tuition fees obscured the fact that we were well ahead of the other parties in thinking that through and I think that we should continue to lead in the way in which we craft our manifesto this time round, and I think the other parties will have to as well. But it’ll be more difficult for them because they’re much less attuned as majoritarian parties to the idea that maybe they need to draw a distinction between things that are absolutely vital to them and those that are not, and they tend to treat their manifestos as in a sense take it or leave it tablets of stone.

We are going to have to prioritise our manifestos in a different way. I think you can do it in a common sense way. I really don’t think it’s difficult to explain on the doorstep as we sought to at the last election and in fact we can point to our experience in the last few years, we can say, “look, when we knocked on your door in 2010 we showed you our manifesto and it had four things we really wanted to do, we’ve stuck to that”. Okay, in the end we didn’t deliver political reform quite in the full-throated way wanted, but by golly did we try hard and others didn’t. And I think people get that.

It means that there will be a funnel-like approach to our manifesto. There will be things that emerge as more of a priority than others.

NT: Steve Webb was the other day challenging the other parties and us as a party to say if we would continue with the triple lock, because of course it’s not embedded anywhere in legislation at present, it requires a political commitment from the incoming government. Is it affordable?

NC: I’m a huge advocate of the triple lock guarantee. In fact I think it was one of the best things we brought to government from opposition, and of course it was devised by Steve in the first place. I think to be fair to Steve his comments were somewhat misrepresented. What he was saying was that each party will need to decide for itself, but that he himself was a keen advocate of the triple lock because it gives such belt and braces reassurance, especially to a lot of vulnerable pensioners on the state pension, that they’re not going to be deprived of the support they deserve.

We’ve got a much bigger issue, which is a generational issue as we all know, which is that the squeeze has fallen harder on the shoulders of the younger generation. That’s why I’ve come to the view that one of the urgent bits of work we need to do both in government and more widely is look at the way in which we support particularly that generation of 16-24 year olds, the education-into-work group, who are very poorly served at the moment by a hotchpotch of different and often conflicting government initiatives which are very confusing, a pea-soup of acronyms, and the money is not well spent. One of my top priorities over this summer is to really get to grips with this, because we’re spending hundreds of millions of pounds as a society and we’re not serving them well at all.

Liberalism is nothing if if it’s not a philosophy which is optimistic about the future, so we should have a natural appeal to young people. I do think we need to revisit some of the ways in which we can make sure that the younger generation don’t feel as if they’re somehow being shortchanged by support for others. What we’ve got to avoid as a country, because it’s very dangerous in my view, is a sense that we’re setting up one generation against another. That doesn’t mean pulling the rug out from under the feet of those who’ve retired and paid their way and need to be supported by things like the triple lock. It does mean I think we need to do considerably more for the younger generation who are under a lot of pressure at the moment.

NT: Could I ask you a more general question? One of the themes that you have been pursuing over the last year or so or longer is that the Liberal Democrats are anchoring the government in the centre ground. Is liberalism in your view an inherently centrist ideology or is that Cleggism — your particular strand of liberalism — means that the Liberal Democrats are in the centre ground of British politics?

NC: No, I think that liberalism — and I certainly wouldn’t be silly enough to claim that an individual politician can somehow claim that their views should endure — is a long, proud and actually in many ways typically British view of life that stretches deep into the 19th century in our politics. I think it has many values at its heart but one of them is balance: the idea that that in that vital relationship between the individual and the state we strike the right balance. Labour don’t get the balance right because they constantly — in a way that a Liberal never would — argue that the state is the answer to every problem even when the state is the wrong solution or actually even maybe an illiberal one.

And of course the Conservatives take a very sink or swim approach to society as a whole.

I’ve always thought that there are three basic strands of philosophy, if that’s not a too pompous way of putting it. One is a Labour one, which actually had a very admirable pedigree when we were as a country going through a phase of emancipating millions of working men and women who weren’t economically, politically or socially emancipated, and they used the state — the Labour party did in the 20th century — as a sort of battering ram to emancipate those millions of men and women, and that’s nothing to be ashamed about because that was a very proud thing to do. I just don’t think that over-reliance on the state — and you can see it in illiberal attitudes to terrorism legislation, their centralising attitude towards local authorities and a range of areas — I just don’t think that works in a society that has become more liberal, where people enjoy freedom, enjoy choice, enjoy access to information.

The other side of course is a Conservative one which as its name implies basically thinks the way things are should be the way things remain, and that who’s doing well and who’s doing badly, well there’s not much we can do about it. It’s quite a pessimistic view of life, actually, and quite a regressive one.

Then there’s a liberal view, which is a balanced one, that starts first and foremost I think with people, with individuals, with the view that we shouldn’t write anybody off, that every person has the potential to do great things and that one of the principal purposes of politics is to release people’s potential to the fullest possible degree. The state plays a role in that but the state can’t reach into the living rooms, into every nook and cranny of our private lives to release that potential: it’s a mixture of responsibility and opportunity.

I just so happen to think that that’s where the vast majority of the British people are – of different shades of opinion – and I don’t think we should be in any way embarrassed by staking a claim to being representative of that fine British liberal tradition. I know that some people sometimes think that we should define liberalism as pure, insurgent, almost sect-like but I never understood that. I’m perfectly happy to engage with people who want to take a more purist approach, where you’re almost deliberately saying that you’re not appealing to the majority of the people, but I’m a politician — I’m not an academic — who believes that the purpose of politics is to be clear about your values and then make sure that they speak to millions of people in the country so that you can deliver the changes you want. It’s as simple as that. You can’t do that if you wilfully say, “oh we’re not by the way appealing to the reasoned, liberal mainstream of Britain”.

Quick-fire questions

NT: What was the last film you watched?

NC: I went [to the cinema] with my boys and took them to see, is it The Gnuds?, The Grudes? [Clegg’s special adviser interjecting: “The Croods”] The Croods! That’s the last time I went to the cinema. It’s basically just a glorified video game as far as I could make out. But I’m a big fan of quality cartoons. Kung Fu Panda I have to say is one of the greatest films made in recent years. It’s superb, it’s superb…

NT: You’re possibly not the best judge of this but what is the best thing you cook?

NC: Cook? Oh, I’m an appalling cook. I’m an atrocious cook. I wouldn’t recommend any of my cooking to anybody, I really wouldn’t. I love eating, so I’m a great consumer of good food but I’m a rubbish producer of good food.

NT: What is your favourite iPad app?

NC: I’m not actually such a big iPad man to be honest. Anyway I’ve got a Samsung pad so I don’t know many of the iPad apps. I like Google Maps a lot.

NT: You don’t have an app like the prime minister, to get all your government business?

NC: I’m not sure he does actually. I’ll tell you what, though, what I have seen in three years of government is that it is still such an absurdly paper-based system. I mean look at this, I’m sitting here opposite you, you should feel this [he lifts up his ministerial red box] great big thing, lead-lined, with hundreds of pages in, and it’s like this every day. I cannot believe that in ten years’ time we’ll be carrying on conducting government like this. It’s extraordinary the centre of government is still so firmly stuck, when it comes to circulating information, in the 19th century.

* Nick Thornsby is a day editor at Lib Dem Voice.