Question: Just before the election, you said that this is the best opportunity to break the mould of British politics. Labour is now on a second landslide - doesn't that mean that the old mould is still in place?

Charles Kennedy: No I don't think it does. I'm sure incidentally, that "break the mould of British politics" was a Roy Jenkins phrase, that I doubt that I would have claimed one of Roy's phrases as my own. But I think it was certainly the best chance in a long time, for us to increase our share of the vote, and increase the number of seats: and we did both. And at the same time, we did that, quite unusually, against all the trends of all previous post-war elections where the government of the day went back with more or less the same majority. You would have expected the so-called 'official opposition' - the Conservatives - to make progress. And that progress would have obviously involved, by definition, us falling back a bit. But the fact that we went forward, and they didn't really go forward at all, was a remarkable result, and the government was remaining unchanged. I think it was actually a break through election for us, because it demonstrated that 1997 was not just some kind of accident. We're here to stay, and here to stay with increasing presence.

Question: As a serious opposition you give praise where it is deserved and constructive criticism where it's deserved - so on that basis how do you say Labour has started its second term in office?

Charles Kennedy: Well, there was one journalist who said that Labour has not hit the ground running, but just hit the ground. And John Monks of the TUC has described it as the shortest honeymoon in history. I think that there is already a degree of battle fatigue about the government. But equally, I don't think they have any clear idea on the big definitive issues, particularly the public services; what it is they are trying to do, and how are they trying to do it. If you think about it, you've got this historic second term Labour government with an invincible Commons majority - numerically. And far from there being a sense of jubilation in the Labour party, you watch the first few Prime Minister's Question Times, and the faces are fallen on the Labour benches in the House of Commons. If you didn't know anything about British politics, you would say that Labour is the party that has just lost; they look so depressed. So I think the down side has been a clear lack of direction and purpose about the government since the election. They've got the second term and now they are scratching their heads wondering what it is they are going to do about it.

Question: The Conservative Party is looking for a new leader, how would a Ken Clarke victory aid the campaign for the Euro?

Charles Kennedy: Well, the Conservatives have got themselves into such a divided mess, that it's difficult to know really. Ken Clarke, whether he is leader of the Conservative Party or not, as and when there is a Euro referendum, I hope will be a very big player in it. He might be less of an asset to that campaign if he was leader, because he would be leading such a divided party on the issue, no doubt about it. He'll be perpetually having to trim his public views and his language on the Euro in order to placate the massive majority on his own benches who vehemently disagree with him on this issue. So that could be a minus in those circumstances. If it's Iain Duncan Smith, then clearly he will be leader of the opposition to the Euro and I think again all that will do is condemn the Conservatives to be divided on the issue.

Question: Would you be happy to sit around the Cabinet table with Tony Blair and Ken Clarke as leader of the Conservative party in a joint cabinet committee discussing Europe and the Euro? Can you see that happening?

Charles Kennedy: Well in a sense they've done it already, because when we had the launch of Britain in Europe the best part of a couple of years ago it was Tony Blair, and Gordon Brown, Michael Hestletine, Ken Clarke and myself having discussions about that launch the day before. As a backbencher Ken was very happy to work hard for the pro-Euro cause in spite of the enormous hostility to it on his own side and in spite of the very real problems his actions must have caused the then leader of the Tory Party. So I am quite sure we could all work together again. By the time we get to a Euro referendum, and who knows when that might be, I would anticipate more and more Pro-European Conservatives are probably going to be examining their consciences.

Question: Talking of Joint cabinet committees -are you going to continue the dialogue with Labour in their second term?

Charles Kennedy: To be decided, to be perfectly honest. We will clarify this by the time of the party conferences, and it needs to be so people know where they stand. This is only my third day back since my summer break, and the in-tray is pretty busy with things to catch up on. So that has yet to be resolved, but it could only be continued I would have thought, if there were issues of constitutional reform that the government want to place on that agenda - because it is their committee at the end of the day. It's chaired by Tony Blair; it's a government committee. Now if they put up an issue of constitutional reform, I'm quite happy to sit there and have a look at it, but if they don't then obviously we will have to reconsider what we will do. But that decision has not been made.

Question: Are you disappointed about the state of discussions on Lords reform?

Charles Kennedy: Yes, and we made clear before the election that we didn't really see any way forward between the two parties on that issue because they are just simply too far apart at the moment. I was disappointed and I think they are making a mistake, but that is their decision.

Question: In the past you've talked about disenchanted Conservatives coming over to the Lib Dems. Which candidate becoming leader would result in more Conservatives moving over to you?

Charles Kennedy: If Iain Duncan-Smith were to win, then an awful lot of one nation moderates, pro-Europeans who've voted Conservative would re-examine their consciences. I think the sadness of this could be, if that does happen, that too many of them might be lost to active politics and community involvement altogether - and they might just walk away from the whole process. Which I think will be sad, because a lot of people with a lot of talent have made a long-standing commitment there. The same may be true if Ken Clarke wins, because the party will be divided and will put off voters.

Question: What is the potential scale of this exodus?

Charles Kennedy: Oh who knows, I honestly can't judge that.

Question: The Conservatives still have over 100 more seats than the Lib Dems, do you think you could realistically overtake them at the next election?

Charles Kennedy: Too early to say, really too early to say. The potential is there at the next election, based on the evidence of the last two elections now, but as to further increase at our present spurt - assuming the system continues to be first past the post, it's an obstacle - but who knows what happens. We've already confounded the pundits by increasing our share of the vote and our number of seats at the election, and I'm positive that we can, and we will, continue to grow in strength even further.

Question: We've talked about the possibility of disenchanted Conservatives possibily defecting to the Lib Dems - but surely the recent case of Shaun Woodward reveals how their new home is New Labour?

Charles Kennedy: Well, look at those former Conservatives who have joined the Liberal Democrats over the last few years: Emma Nicholson, Hugh Dykes (former MP), James Moorehouse (former MEP), Bill Newton-Dunn (current MEP), David Price (former MEP), Jon Lee (during the general election - former MP, twice a government minister for the Conservatives). I mean, there has been a steady haemorrhage in our direction. And I think they are coming over for a variety of reasons, for some it's Europe - the defining issue, but for others it is that they are traditional One Nation Conservatives with a traditional commitment to social justice, and they don't see that commitment any longer in their party - or what was their party. For some, it's the fact that they believe in getting things done in politics and they don't see much prospect of that for a long time to come with the Conservative party, but they do see the difference between a party which is at best static, and more likely in decline, and a party that is clearly on the way up and is now in government in Scotland and Wales and which holds the balance of power in the House of Lords. Liberal Democrats now have much more influence and power than the Conservatives. However, the main issue isn't about Conservative politicians joining us - it's about us appealing to the broad mass of people who no longer feel able to vote Conservative.

Question: Commentators say Lib Dems are to the left of Labour now, do you go along with that assessment?

Charles Kennedy: No. I wouldn't. I think that all along we have been more progressive than Labour, and I think that will become even more clear in the course of this parliament with the issues that are on the agenda. And, I think commentators that do lapse into that sort of language should look at the evidence of the election. We were asked this repeatedly, hardly a day went by when this question wasn't being put to me; that this would lose us votes, and this would cost us seats, but it did neither because that is not how the public view politics. They want solutions to problems, and these old fashioned terms of value to the left of this or to the right of that really don't apply anymore.

Question: Looking at the government's view of private sector involvement in public services. What do you see as the solution?

Charles Kennedy: First of all, we have no ideological problem, never have had with the private sector being involved in the improved delivery of public services, that's absolutely fine. And if you've got full capacity, say in the health service, then why not utilise under-capacity in the private sector for health care - if that means somebody gets their treatmentwhere otherwise they have to wait in pain. But that's very different from saying that you impose a private sector catch all approach in the public sector, which doesn't take into account the fact that there is an awful lot of people in the public sector who are not motivated in quite the same way - I'm not saying one is right and one is wrong - but they have not got the same motivation as those who are primarily in the business of making profits. They are there to help provide a service and to help put something into society and I think the mistake the government are making is slightly falling into the trap of suggesting to people that they know the price of everything, but they don't really understand the value of anything very much. And that's the big difference between them and us.

Question: Why do you think the Labour party has focussed on the private sector?

Charles Kennedy: Because they failed to deliver in their first term in public services, and they did that because they stuck rigidly to the orthodoxy that they inherited from Ken Clarke and the Conservatives in terms of spending commitments and investment. Then they panicked, before the election and certainly during the election, because they began to realise how disillusioned a lot of their own supporters were with their failure to deal with it. And, looked around rather frantically for other means by which they could promise better things tomorrow. And this is the route that they chose to go down and I think that they will live to regret the day.

Question: There's been increasing reports of growing fears about the politicisation of Whitehall - are you concerned by this?

Charles Kennedy: Yes I am. My colleague Matthew Taylor has in fact invoked the data protection act to find out, because he has not been satisfied by the parliamentary answers that he has had since the election, just how many civil servants are occupying quasi party political posts, not just within No.10 itself, but the Whitehall machine as a whole. And the Civil Service Union is obviously very concerned about this, and we will be hearing about this at the TUC conference next week. And, we certainly share their anxiety, I think that the line has become far too blurred.

Question: But isn't there the argument that political appointees get the job done?

Charles Kennedy: Well, is there? If they got things done then why is everyone up in arms about the schools, the hospitals, the transport system - you could go on. And how many task force set-ups have there been since the election of one kind or another? I understand that one select committee is planning to have John Prescott in to give evidence; because they are trying to find out what exactly he is doing now. And they are getting conflicting answers from No.10 - one person is saying Gus MacDonald does that, and another says John Prescott does that. Who is doing what? And I think a lot of this is slipping out of the direct control of the elected politicians into the indirect control of either civil servants or people hauled in from outside interests, business, commerce, industry whatever. They may be very good people in their own right, but they are put in charge of all these anonymous task forces and working groups and so on, and nobody really knows what is going on.

Question: What are your key objectives for the forthcoming Lib Dem conference?

Question: Do you think the Conservative Party could really sink as we know it?

Charles Kennedy: Well, senior Conservatives are saying they could sink and they speak with more inside knowledge than I can. There is no God-given rule, no inverse law of electoral politics, that what goes down must come back up - and there is no reason at all why what we have seen so far does not represent the lowest point yet to be achieved by the Conservative party.