In defence of Vince Cable

That was the week that was . . .

During the coalition talks and after the general election in May, Vince Cable addressed a meeting of Liberal Democrats and told them that "my heart beats on the left". What he meant, of course, was that he was closer to Labour than to the Conservatives, even to David Cameron's liberal Conservatives.

He was still then just about the nation's favourite Vince, a self-styled "free radical" and economics sage. All the same, he urged his fellow MPs to follow him into coalition with the Tories, because, as he told me when I interviewed him in September at a fringe event at the Liberal Democrats' conference in Liverpool, he was "an enthusiastic deficit hawk", and believed that the deficit had to be cut faster and harder than Labour proposed, with some "in-year cuts". He also spoke to me about the pressures of collective responsibility.

Now, all these months later, it's clear just how damaged the Lib Dems have been by their association with the Tories. They are as low as 8 per cent in some polls. Effigies of their leader, Nick Clegg, have been burned on the streets. Students are rioting because of "betrayals" and broken pledges on tuition fees. They are perceived as flip-floppers and liars.

As ever, the truth is more complicated. I had dinner recently with a senior Lib Dem minister who explained just how much his party was doing inside government to "rein in and moderate" the Tories.

Cable is a social democrat and a Keynesian economist by training. He once told me over lunch at the New Statesman that, though he left the Labour Party long ago, he believes "passionately in the redistribution of wealth".

This week, as we all know, "Saint Vince" was humiliated after he was secretly recorded by those two giggly female undercover reporters at his constituency office; he has since been stripped of key responsibilities as Business Secretary after his assault on his "enemy", Rupert Murdoch.

His disparagers, perhaps long jealous of his popularity, have delighted in his humiliation. They have lined up to insult and traduce him. Newspaper columnists, from all sides, have been leading the charge. He is finished, they say. He is arrogant and complacent.

When the revelations broke, Ed Miliband called on David Cameron to sack Cable. This was a mistake by the Labour leader, because one day soon he may well need Cable's support. Instead of calling for him to go, he should have concentrated on the substance of what he'd said. Miliband was in front of an open goal and missed the target. Only the next day did he firm up his attack on the coalition.

Yet Cable had confirmed what many of us suspected – that this coalition is no "love-in". The Tories are in charge and they are behaving recklessly. The Lib Dems are taking the heat and they are being burned. In their haste to overturn Labour's legacies and dismantle Gordon Brown's client state, the Tories are in too much of a hurry – the admirable Tim Montgomerie, of Conservative Home, has written in the New Statesman of the "breakneck coalition". Their reforms to the health service, the welfare system and education are zealous and dangerous. Indeed, as Cable said, "they have not been thought through", as Michael Gove demonstrated once again with his latest reversal, this time on the School Sport Partnership programme (cut one minute, restored the next!).

Vince Cable may be something of a lone wolf, but he remains hugely popular among activists, as I discovered at that fringe meeting in Liverpool. Later, at the same conference, on 22 September, he gave a good speech in which argued for a new approach to taxation, switching the burden from earned to unearned income, from taxing income, or jobs, to assets, principally property and land. He said:

It will be said that in a world of internationally mobile capital and people it is counterproductive to tax personal income and corporate profit to uncompetitive levels. That is right. But a progressive alternative is to shift the tax base to property, and land, which cannot run away, [and] represents in Britain an extreme concentration of wealth.

(I wrote about the need for land reform and a new social democratic model in the New Statesman cover story of 18 October.)

Cable's mistake was to trust those two crafty female reporters not wisely, but too well. We demand that our politicians tell the truth but then vilify them when they speak candidly to "constituents". He's guilty of nothing more than vanity. It is correct that he remains in the cabinet, even though he is for now diminished.

Footnote: By the way, Vince sure knows how to wear a hat. He's been a fan of the fedora for years, and was wearing a particularly rakish one in photos taken after his unfortunate gaffe. Unkind observers might say it made him look like a minor character in a 1950s spy thriller. But everyone else will just be glad it's not a William Hague-style baseball cap.

Incidentally, can you imagine Cameron or Osborne in a hat? Beanie – too student protest. Flat cap – too Labour. Bowlers, boaters or top hats – too Bullingdon Club. That just leaves a Stetson . . .

Jason Cowley is editor of the New Statesman. He has been the editor of Granta, a senior editor at the Observer and a staff writer at the Times.

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Brexit has opened up big rifts among the remaining EU countries

Other non-Euro countries will miss Britain's lobbying - and Germany and France won't be too keen to make up for our lost budget contributions.

Untangling 40 years of Britain at the core of the EU has been compared to putting scrambled eggs back into their shells. On the UK side, political, legal, economic, and, not least, administrative difficulties are piling up, ranging from the Great Repeal Bill to how to process lorries at customs. But what is less appreciated is that Brexit has opened some big rifts in the EU.

This is most visible in relations between euro and non-euro countries. The UK is the EU’s second biggest economy, and after its exit the combined GDP of the non-euro member states falls from 38% of the eurozone GDP to barely 16%, or 11% of EU’s total. Unsurprisingly then, non-euro countries in Eastern Europe are worried that future integration might focus exclusively on the "euro core", leaving others in a loose periphery. This is at the core of recent discussions about a multi-speed Europe.

Previously, Britain has been central to the balance between ‘ins’ and ‘outs’, often leading opposition to centralising eurozone impulses. Most recently, this was demonstrated by David Cameron’s renegotiation, in which he secured provisional guarantees for non-euro countries. British concerns were also among the reasons why the design of the European Banking Union was calibrated with the interests of the ‘outs’ in mind. Finally, the UK insisted that the euro crisis must not detract from the development of the Single Market through initiatives such as the capital markets union. With Britain gone, this relationship becomes increasingly lop-sided.

Another context in which Brexit opens a can of worms is discussions over the EU budget. For 2015, the UK’s net contribution to the EU budget, after its rebate and EU investments, accounted for about 10% of the total. Filling in this gap will require either higher contributions by other major states or cutting the benefits of recipient states. In the former scenario, this means increasing German and French contributions by roughly 2.8 and 2 billion euros respectively. In the latter, it means lower payments to net beneficiaries of EU cohesion funds - a country like Bulgaria, for example, might take a hit of up to 0.8% of GDP.

Beyond the financial impact, Brexit poses awkward questions about the strategy for EU spending in the future. The Union’s budgets are planned over seven-year timeframes, with the next cycle due to begin in 2020. This means discussions about how to compensate for the hole left by Britain will coincide with the initial discussions on the future budget framework that will start in 2018. Once again, this is particularly worrying for those receiving EU funds, which are now likely to either be cut or made conditional on what are likely to be more political requirements.

Brexit also upends the delicate institutional balance within EU structures. A lot of the most important EU decisions are taken by qualified majority voting, even if in practice unanimity is sought most of the time. Since November 2014, this has meant the support of 55% of member states representing at least 65% of the population is required to pass decisions in the Council of the EU. Britain’s exit will destroy the blocking minority of a northern liberal German-led coalition of states, and increase the potential for blocking minorities of southern Mediterranean countries. There is also the question of what to do with the 73 British MEP mandates, which currently form almost 10% of all European Parliament seats.

Finally, there is the ‘small’ matter of foreign and defence policy. Perhaps here there are more grounds for continuity given the history of ‘outsourcing’ key decisions to NATO, whose membership remains unchanged. Furthermore, Theresa May appears to have realised that turning defence cooperation into a bargaining chip to attract Eastern European countries would backfire. Yet, with Britain gone, the EU is currently abuzz with discussions about greater military cooperation, particularly in procurement and research, suggesting that Brexit can also offer opportunities for the EU.

So, whether it is the balance between euro ‘ins’ and ‘outs’, multi-speed Europe, the EU budget, voting blocs or foreign policy, Brexit is forcing EU leaders into a load of discussions that many of them would rather avoid. This helps explain why there is clear regret among countries, particularly in Eastern Europe, at seeing such a key partner leave. It also explains why the EU has turned inwards to deal with the consequences of Brexit and why, although they need to be managed, the actual negotiations with London rank fairly low on the list of priorities in Brussels. British politicians, negotiators, and the general public would do well to take note of this.

Ivaylo Iaydjiev is a former adviser to the Bulgarian government. He is currently a DPhil student at the Blavatnik School of Government at the University of Oxford

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