The real winners of the Vince Cable debacle
Yep, the bankers!
I took part in a slightly bizarre but fun Today programme discussion this morning about whether or not we have a "Maoist" government. You may remember the remarks by the Business Secretary, Vince Cable, who told two undercover Telegraph journalists:
There is a lot of things happening. There is a kind of Maoist revolution happening in a lot of areas like the health service, local government, reform, all this kind of stuff, which is in danger of getting out of . . . We are trying to do too many things, actually.
He was also, we assume, one of the key cabinet sources for Andrew Rawnsley's column in the Obs last weekend:
I have actually heard more than one member of the cabinet explicitly refer to the government as "Maoist".
In fact, the truth is that we political journalists have short memories. Despite all the song and dance about Maoism, which prompted this morning's Today programme chat on Radio 4 (involving not just me, but the noted China and Chairman Mao specialist Jonathan Fenby) and led to the FT's "Mao rating" scheme, Cable actually used the Maoist tag in public more than a month ago.
From the Guardian, 12 November:
The abolition of regional development agencies by the coalition was a "little Maoist and chaotic", Business Secretary Vince Cable told a gathering in Birmingham last night.
Cable has a rather curious relationship with communist language, analogies and labels. As the politics lecturer Ed Rooksby points out over at Comment Is Free:
What is it about Vince Cable and communism? Barely a month seems to go by without Cable comparing others, or being compared himself, to something or someone related to it. In September, the Liberal Democrat minister was accused (implausibly) of being some sort of quasi-Marxist after making some mildly critical remarks about capitalism in a speech. In 2007, Cable made his memorable quip about Gordon Brown having undergone a "remarkable transformation . . . from Stalin to Mr Bean". While having his own Mr Bean moment, revealed this week, Cable was at it again. This time it was Mao.
Rooksby makes an important if provocative point at the end of his piece on Cable, the coalition and Chairman Mao. Like the Maoist government in China, he writes:
. . . this is, in an important sense, a class-struggle government – one acting consciously and directly on behalf of the rich. The role performed by the government in conditions of economic crisis is, all too often, to shift the costs of that crisis on to the poor and least well-off. The last government bailed out a banking system on the verge of collapse. Now this one is demanding that the rest of us pay for it, and is setting about that task with great enthusiasm.
You might roll your eyes at the analogy, but which group of people, aside from the bosses and shareholders of Rupert Murdoch's NewsCorp, will be rubbing their hands in glee this week at the sight of Cable's very public and humiliating defenestration? Yep, you guessed it, the bankers.
Here's the well-informed James Chapman writing in the Daily Mail:
The prospect of a crackdown on a £7bn bonus windfall for bankers is receding as a result of Vince Cable's weakened position in the cabinet.
The Liberal Democrat Business Secretary had been leading demands for tough action as banks prepare to make a bumper round of payments.
Mr Cable's allies have suggested Britain should follow Ireland's lead and block bonuses at institutions part-owned by the taxpayer, such as the Royal Bank of Scotland.
Cable built his reputation, in opposition, as the hammer of the bankers; in government for the first time in his life, he had the opportunity to help restrain the excesses, greed and irresponsible behaviour of our bailed-out financial elites. But no more. He is a diminished figure, lacking clout and credibility. George Osborne will be the man doing the deals with the bank bosses on behalf of the coalition and, as Cable admitted to the Telegraph duo:
We have a big argument going on about tax [on the bankers] and that is party political, because I am arguing with Nick Clegg for a very tough approach and our Conservative friends don't want to do that.
Osborne and his City allies might argue, in response, that the Treasury has already announced a levy on banks that will raise £2.5bn a year. But as the Labour MP Chuka Umunna, a member of the Treasury select committee, pointed out the day after the Chancellor's Spending Review on 20 October:
The government has opted to apply the levy over and above a £20bn allowance rather than using a threshold. Under a threshold, any bank with total liabilities of more than £20bn would have been taxed on all their profits, while under the plans announced today all banks regardless of their size will not be subject to the levy on their first £20bn of taxable liabilities.
A stipulation was included in today's plans that the levy will not apply to firms where 50 per cent or more of activity is defined as "non-financial". Because investment banks often have extensive and varied operations, this could allow firms to dodge the tax.
Figures obtained by Umunna through a parliamentary question in July show that the government only hopes to raise £1.15bn from the levy in 2011-2012 and £8.37bn in total between 2011-2012 and 2014-2015 – less than half the government's total cuts to welfare spending of £18bn announced in the Spending Review. As Rooksby concluded in his CiF piece:
The last government bailed out a banking system on the verge of collapse. Now this one is demanding that the rest of us pay for it . . .