Nick Clegg: 'The future of British politics will inescapably have to be liberal - with a small L'

The Monday Interview: Liberal Democrat MP, shadow spokesperson on foreign affairs

"OK," I say. I agree not to ask him about being singled out as leadership material. But it's true, of course.

He may have been an MP for only four months, but the former EU official is constantly talked about as a long-term prospect to take over from Mr Kennedy, which is mildly surprising considering his eclectic political background.

In Brussels he was a speech writer for the former Tory cabinet minister Leon Brittan, a vice-president of the European Commission, who is now backing Kenneth Clarke for the Tory leadership. This is where I find Mr Clegg - finishing a convivial lunch with his old boss in a modest Italian restaurant in Pimlico, near the House of Commons. They are discussing the prospects of Clarke becoming leader, like old pals. Lord Brittan recently endorsed Mr Clarke, and Mr Clegg is congratulating him for his sound judgement.

The MP for Sheffield Hallam says he is "quite a personal fan of Ken" having lived in his constituency and shared many pro-European platforms with him. He praises the Tory leadership contender's "swashbuckling performances" in the Commons but questions whether his "wonderful bonhomie is matched by insight into what is actually needed over the next few years".

Mr Clegg says the future of British politics will "inescapably have to be a liberal one - liberal with a small L". The Liberal Democrats must be on their guard against a rejuvenated Conservative Party moving into traditional Liberal Democrat territory.

"I don't excuse the possibility that a very smart Conservative leader could try to make significant moves in that direction," he says. "Of the three contenders it looks as if Clarke might be most adept at doing that because he has got appeal."

He says "the worst response" to a revived Tory party, under Ken Clarke, would be for the Liberal Democrats to "vacate" the centre ground because "this big bruiser is somehow muscling in on our territory". "The game in politics for us is to occupy and lead the debate in the liberal centre of British politics."

In a salutary warning to his colleagues who dismiss the Tories, he says it would be "foolish" and complacent to suggest the Conservatives "have gone for ever".

"We are a third party that has been growing but we are still some way off eclipsing the Tories in terms of the level of the vote. To somehow dismiss a party that, despite everything, has a higher proportion of the vote than us at the last election seems to me to smack of complacency. To say the Conservatives are down and out, flat on the floor and can't recover is very dangerous. Anyone would be foolish to say that."

Mr Clegg says the "deeply illiberal bent of the Conservative Party over the last 10 years" has made talk of co-operation between the Liberal Democrats and the Tories "genuinely impossible".

But could a pact be feasible if a more liberal Tory philosophy emerges? Nick Clegg answers diplomatically, refusing to rule out the principle of coalition.

"I think any political party that advocates electoral reform and greater proportionality in an electoral system accepts the principle that governments can be composed of different kinds of coalitions," he says. "So I think it would be inconsistent with the Liberal Democrat belief in constitutional reform to say you have to declare a theological omerta on any particular deal."

But talk of coalition now may be premature. The task for the Liberal Democrats after an election, he believes, is to find a fresh and distinctive political narrative. He is critical of the "Lib Dem pitch to voters" since 1990 and says the policy on public services has been "paralysed" by taboos about discussing reform of public services. The party cannot "just trundle along on the same tramlines as before", he says, adding that "defending the status quo" with the NHS is no longer an option.

"We have taken quite a small C conservative approach to public services in which one candidate after the other says 'I will save this I will save that'. If one is brutally honest it has basically been focused on the case for greater public money for public services."

But after a general election the party can now move on and "let its hair down" politically. It can even afford to be "reckless" in its thinking.

He says the party should "break a long-standing taboo" by talking frankly about reforming the public services. The starting point is the Royal Mail, which as a motion before this week's Blackpool conference suggests, should be part-privatised.

Nick Clegg says he supports this reform one hundred per cent. But he goes further, committing what would be regarded as heresy in some Liberal Democrat circles.

When his colleague David Laws MP, in an article in the now notorious Orange Book broached the question of reforming the NHS, he was almost lynched by his colleagues. But Nick Clegg isn't content to hide behind the safe prosaic rhetoric that surrounds most health service debates. He rejects old platitudes and, in a refreshingly honest and outspoken intervention, declares bluntly the NHS should be "broken up".

"One very, very important point - I think breaking up the NHS is exactly what you do need to do to make it a more responsive service." Then he goes further, even refusing to rule out the insurance-based models used in mainland Europe and Canada.

"I don't think anything should be ruled out. I think it would be really, really daft to rule out any other model from Europe or elsewhere. I do think they deserve to be looked out because frankly the faults of the British health service compared to others still leave much to be desired."

As he sets out his ideas on how to improve the NHS, Mr Clegg is temporarily distracted by rows of bare-breasted Pirelli calendar models staring from the wall of the restaurant. But his mind swiftly turns back to the health of the nation and he declares: "I am absolutely clear that the status quo is utterly unacceptable and will have to change. We will have to provide alternatives about what a different NHS looks like."

He says the NHS now is "run in effect according to an accountancy handbook instead of what is most responsive to the needs of local patients".

Local people must be given more control, even if this means breaking up the NHS. "We do want to break up the NHS. We don't want to privatise it we want to break it up," he says. "There is quite a big difference. Should the debate be taboo? Of course not, absolutely not."

Mr Clegg is equally frank about the party's tax policy. He says proposals in a consultation document to raise taxes for the middle classes - through rises in national insurance contributions - are sorely misguided and even "unjust".

"I don't think that clobbering middle England is the solution to our problems either economically or politically. And I don't think a legitimate concern that must remain about alleviating the burden on the lowest paid should be paid for by basically squeezing the middle classes. That seems to me to be extremely dangerous."

Mr Clegg says the party's policy of 50 per cent income tax on people earning more than £100,000 should be looked at again because of the signal it sends to people who are not, but aspire to be, high earners. He also express scepticism about proposals for a flat tax and "squeezing the pips" and warns that proposals for a flat tax would also hit middle income earners. "I have not yet seen any evidence that suggests to me that flat tax does anything other than a regressive effect. You could benefit those on the lowest wage and the higher wage and squeeze people in the middle."

He is "worried" that the party's tax policy is too preoccupied with making the sums add up and offering "blandishments" to particular groups of voters, such as pensioners, rather than framing a coherent political message.

"We have got to make sure our tax policy isn't worked out as a rather specific set of incentives for specific groups of voters. It has to be consistent with the overall image of values that we have."

The CV

* BORN: 7 January 1967

* FAMILY: Married with two sons

* EDUCATION: MA anthropology, Cambridge University 1986-89; political theory, Minnesota University 1989-90; European affairs, Collège d'Europe, Bruges 1991-92

* CAREER:

1990: Trainee journalist, The Nation magazine, New York

1991: Trainee, European Commission, Brussels. DGI, G-24 Co-ordination Unit

1992-93: Political consultant, GJW Government Relations, London

1996-99: Adviser to vice-president of the European Commission in Brussels

1999-2004: Member of European Parliament as Liberal Democrat MEP for the East Midlands

2005: Elected MP for Sheffield Hallam ; Liberal Democrat spokesperson on foreign affairs