Interview: Vince Cable

The Lib Dem minister would have preferred to govern without George Osborne. He talks to James Macintyre about coalition rifts over tax, banking and Europe
October 19, 2011
A lonely figure in the government? The secretary of state for business reads through notes at the Lib Dem conference

Vince Cable takes a deep breath, and pauses. “Let’s just say I’ve warmed to him,” he responds eventually. Speaking to Prospect in his massive office—almost the length of a tennis court—at the department for business, innovation and skills on Victoria Street, Cable is diplomatic when asked if he likes George Osborne. He did, after all, “spend 30-odd years fighting the Tories.” He says of the chancellor, his boss: “Our relationship is professional rather than a personal friendship. But I’ve certainly warmed to him and we have a good working relationship.”

There are points of agreement, including on the eurozone crisis. Cable is adamant that Britain should not, for either “moral” or self-interested reasons, contribute to a eurozone bailout. “No I don’t think so… We helped Ireland, and Ireland actually has turned around remarkably. But we’re not members of the eurozone and I don’t think they expect—and we certainly don’t think it would be right—directly to contribute to their arrangements.”

But he warns that the turmoil could have repercussions for Britain. “It depends how the crisis unfolds. If we’re simply talking about Greek banks, that’s a pretty small part of the portfolio of British-based banks… the worry has been that if this then spreads to Spain, to Italy, to Ireland or even France that would all build up in a massive problem.

“Providing that the eurozone countries do the right thing, and they know what they have to do, there is no reason why we should have to worry about the knock-on effect. But nonetheless, it would be idiotic and complacent to say there aren’t any risks out there. Clearly, there are direct risks to our trade, [and] to the banking system, if this eurozone crisis gets out of control.”

However Europe still carries real potential for coalition disagreement. Some senior Conservatives have declared recently that Britain should renegotiate its relationship with the EU. On 9th October, former prime minister John Major called for a “looser” arrangement with an EU that he said was heading for “federal” union. William Hague, the foreign secretary, is said to agree. Cable, a lifelong pro-European, is emphatically opposed. “It just isn’t realistic, nor desirable.” He adds: “I’m not a constitutional lawyer, but I think that we’re hoping treaty change isn’t necessary.” Such a change would require the first referendum on Britain’s relationship with Europe since the 1970s—and there is much talk of this in Westminster. Cable does not rule it out. “Well, that’s a more legal thing,” he concedes. “Politically, if it happens we take it on, we make the case for British membership.”

Cable acknowledges also that “there is a difference between the parties on tax policy.” What would he do differently from Osborne and David Cameron, were he a Lib Dem chancellor in a Lib Dem government? “The differences, I guess, would be partly in tax policy. We’d argue for more far-reaching reform to lift low earners out of tax, and taxing people at the top end. We’d be more redistributive in that sense; that’s one big distinction.” Quite a big difference, surely? “But we’ve compromised in office.” It is an honest assessment, which will enrage critics on the left who accuse this self-described social democrat of “selling out.”

It’s no secret that Cable would have preferred an alliance with Labour after the May 2010 election. But since then, “We’ve all learnt. We followed a very steep learning curve including me. Unlike the Tories, we weren’t prepared for government. They’d spent months, if not years, preparing for the day they came into government; we weren’t [doing that], we had to learn the job very rapidly. I never made any secret of the fact I felt a bit uncomfortable working with Conservatives… but in this department we’ve got a very good team, it works well and I feel very fulfilled.”

If so, it was not always that way. Cable admits, for example, that “there was an argument about Merlin,” the codename for a deal struck between the treasury and the banking sector on bonuses. As the agreement was thrashed out last winter, Osborne won a battle to allow bank bosses to collect their bonuses for the first time since the crash began in 2007. In February, when the deal was announced, Cable called the bonuses “unjustified and outrageous” and his deputy, Lord Oakeshott, resigned as a government spokesman, saying: “If this is robust action on bonuses, my name’s Bob Diamond.” According to the Office of National Statistics, bankers paid each other £14bn in bonuses last year.

But Cable will not be drawn on whether there are disagreements on the Vickers report, published in September, which stopped short of calling for a break-up of banks, and gave them until 2019 to ringfence their high street and investment operations. Asked if Osborne or Vickers have been “too slow” in acting on the banks, Cable says “No. It was a very good process, set up together.” The review of British equity markets, set up by Cable in June and led by the economist John Kay, is “separate” and not a rival inquiry, Cable says. But he describes the Kay review as a conduit for promoting “responsible capitalism,” adding: “When we talked about rewards for failure, it’s very often about people getting a very large bonus or salary based on some short term indicator, not on whether they’ve delivered shareholder value for their company for the immediate or long term.”

Cable disagreed outright with his Tory colleagues over Rupert Murdoch. He referred Murdoch’s bid for a full takeover of BSkyB to the media regulators before he was stripped of his responsibility on the matter by David Cameron, following unguarded comments reported in the Telegraph, where Cable claimed to have “declared war” on the media mogul [see Geoffrey Robertson's article in this month's Prospect]. It was a low point for Cable, who looked rattled and even depressed at the time. But he now feels vindicated after the phone-hacking scandal, and believes politicians should go further to cut ties with the empire. “I think we all have. Everybody’s run a mile in the last few months… I’ve never met these guys, actually.”

Cable says the key issue now is about the concentration of power across different forms of media. “Nobody’s talked about this in the last few months but it’s still a very relevant issue. They are clearly a major cross-ownership group… that’s one thing that we have to pursue. The other thing which hasn’t been pronounced upon is the ‘fit and proper person’ test. [He is referring to Ofcom’s delayed decision on whether Murdoch’s partial ownership of BSkyB is suitable.] “The regulator has been asked to look at this and they haven’t yet come up with a verdict. So rather than score points on particular individuals, I’d say let’s get a good set of rules on media ownership and have a definitive, non-political verdict on whether [Murdoch] is a fit and proper person.”

Looking ahead to the next general election, Cable is adamant that the Lib Dems “will campaign as an independent party.” The prospect of informal truces in certain constituencies such as his own or Nick Clegg’s would be “highly unlikely.” So there will have to be a break-off point? “Yes.” Wouldn’t that have to involve the departure as leader of Nick Clegg? Clegg is closely identified with Cameron, and Ed Miliband has said Labour could not work with him. What about speculation that Clegg may become Britain’s EU commissioner in 2015, as first reported in Prospect? “You’ll have to ask him,” says Cable, who does not rule out an alliance with Labour if there is another hung parliament. But he adds of Clegg: “He said very clearly at conference that he intended to lead us into the next election and that’s the assumption we’re operating on.”

Last month, when Prospect interviewed Chris Huhne, the energy secretary was the bookmaker’s favourite to succeed Clegg as leader of the LibDems. Now Cable is ahead, polling 72 per cent in a recent survey of party members by the website Liberal Democrat Voice. “I have no aspiration to do that job,” says Cable. “I’m happy doing what I do. I’m fulfilled. It’s a big and important job and the last thing I’m doing is planning leadership. That’s just not on my radar screen.”