Question: A big part of your new tax plans is the green tax switch, are you worried as some Conservatives and the government seems to be, of taxing people's fun?

Vince Cable: No, I'm not a puritan in that way, but I think we do have to take environmental issues very seriously and we have to take global warming very seriously.

I don't think we should stop people's fun, but if there is a substantial growth in pollution, as there is from the aviation industry and big cars, then we have to give people an incentive to move to more environmentally friendly behaviour, but ultimately, it is a free society and people make their own choices.

Question: You also want to cut the basic rate of income tax by four pence to 16 pence. The government has its own cut coming into effect next year. Is this a bidding war that you're now getting involved in?

Vince Cable: No. The government 2p tax cuts are completely fraudulent. The way they are paying for it is by raising the tax rate right at the bottom end of the scale from 10p to 20p. Four million people will actually be paying a 20p, rather than a 10 per cent, marginal tax rate and I believe the figures suggest that something like 15 million more people will be paying more in income tax under Gordon Brown's proposal and they're actually at the lower end of the income scale.

It's a very different philosophy. We're suggesting that our four pence cut is financed by a combination of environmental taxes and taxes on the very wealthy. Ninety per cent of the population would actually be better off and the average family would be £100 a year better off.

Question: You're still planning to support a local income tax at the next general election. Is that not your own version of offsetting one tax cut by raising it elsewhere for a lot of middle income earners?

Vince Cable: Well, in practice what would happen is there would be a national tax cut of 4p in the pound and local authorities would be free to introduce their own rate locally. The average works out, I think, at about 3.5. The way the average family  would benefit is that they would pay little more or no more in income tax but they would be getting rid of the council tax altogether. For many families, particularly low earners and pensioners, council tax is a massive burden.

Question: Your own leader has said that at the higher end of the scale you want to 'hammer the rich' with tax levies and the end to some tax reliefs. What makes you think that the rich might just not leave the country and bring in no extra revenue?

Vince Cable: I don't think my party leader did use the words 'hammer the rich'. It was used by his interviewer and he did not dissent from it.

I wouldn't use that language. We're not in favour of hammering the rich; we're in favour of rich people paying their share.

Certainly, some people have been getting outrageous salaries and capital gains in the City of London, and are often paying ridiculously low rates of tax - as low as 10p in the pound in some cases, and they should pay their share. I'm not being vindictive, and am certainly not trying to drive people away, but there has to be a sense of fairness.

We had a YouGov poll which showed that right across the political spectrum, including Conservative voters, there is a wish to have lower levels of inequality and to have the very wealthy paying more. That's the philosophy we have taken forward.

Question: In your keynote speech on Monday you addressed, very directly, the Northern Rock affair and the debt crisis which you have been warning about for some time. How serious is the Northern Rock affair for you? Is it going to bring an end to the Gordon Brown honeymoon?

Vince Cable: Well, I think there are problems on two levels. There is this immediate crisis, and I hope that the efforts that are no being made by the Bank of England to prevent panic and stop people withdrawing their deposits now work.

But even if that happens, and the storm is stilled, there is a deeper underlying problem. Very large numbers of people have borrowed far too much to be able to sustain their mortgages if there is a serious slowdown in the economy of interest rates remained high.

I'm worried that what will happen is growing numbers of people find themselves being repossessed and then default. The government will have to focus on that problem, which is the one I have been talking about for several years.

Question: So can you foresee a house price crash?

Vince Cable: Yes, I'm not in the forecasting business, and my guess is no better than anyone else, but what I did say in my speech yesterday is that house prices are at an extraordinarily high level.

Historical experience suggests that that isn't sustainable. They key point is that a lot of people have borrowed large sums of money against the collateral of their houses at present price levels and that is dangerous.

Question: You're a close ally of Sir Menzies Campbell. Are you as unconcerned as he appears to be about the Lib Dems stumbling in the opinion polls recently?

Vince Cable: Well, I'm not unconcerned, and would certainly like to see us doing much better in the opinion polls.

But the opinion poll ratings are not disastrous by any means, and are not greatly different from what they were at the same period in the last parliament when we went on to win more parliamentary seats as I'm sure we will do next time.

And when we have a head to head confrontation with the other parties, like, for example, at the Southall by-election, we easily beat the Tories into third place. I think you will find that the Liberal Democrats will do very well at the next general election.

Question: Are you confident in areas like your own, in London and the South East, that Lib Dems have the right policy platform or are some of the policies put forward this week more aimed at those Northern seats where you are fighting Labour?

Vince Cable: No, I think the policies I have been setting out, particularly on taxation, will have great appeal in my constituency, which is a relatively prosperous area of South West London.

I think the idea of fairer but not higher taxes, particularly dealing with the injustice of council tax, will have considerable appeal locally.

Question: What does Sir Menzies need to do in his speech on Thursday to end the speculation about his leadership?

Vince Cable: I wouldn't put the problem in those terms. I don't think that in the party there is speculation about his leadership.

He was chosen just over a year ago with a large majority. We knew his personal qualities: experience and gravitas and wisdom, which I think the electorate will start to appreciate during the next general election. We know him, we trust him, and have a high regard for him.