The Vince Cable interview

Britain does not have “an underlying inflation problem”, according to the Business Secretary.

In this week's New Statesman, Vince Cable speaks to the New Statesman editor, Jason Cowley, about the threat of deflation, Nick Clegg and George Osborne, that tuition fee pledge – and why we could be heading for another financial crash. To read the piece in full, pick up the magazine on news-stands from tomorrow.

Until then, here are some of the highlights from the interview.

Cable argues that Britain does not have a problem with inflation and backs efforts by the governor of the Bank of England, Mervyn King, to keep interest rates low in order to stave off deflation. He says:

We don't have an underlying inflation problem. The Bank's job, as the governor keeps pointing out, is not to look at today's numbers, but to look 18 months ahead. It still seems that the centre of gravity at the MPC is very much at the governor. I find that reassuring.

People have not yet come to terms with how bad the financial crisis was, according to Cable, and don't realise that we could be heading for another. He says:

"I think the thing that worries me more than anything else [is that] we really haven't engaged with the real depths and seriousness of the financial crash. I was very impressed with that Warren Buffett metaphor that asset-backed mortgage lending was the atomic bomb, and that there are hydrogen bombs out there. I just don't think that collectively governments have got to grips with this at all." So another huge bomb could go off, sooner rather than later? "It's not imminent. But you can see this happening."

Cable accepts that the Lib Dem pledge not to raise tuition fees was a "serious mistake", and says it was one he never leapt to make.

"We all take responsibility for being involved in [signing the tuition fee pledge]. I wasn't very keen on that [at the time]. But it's collective responsibility" – he pauses, sips his tea – "we all did it. We had a meeting of our key people yesterday. One of my colleagues, who you would think of as quite critical of radical policy, said: 'We should get eight or nine out of ten for our policies, but one or two for our politics.' I think that's a fair assessment of how things are."

Even though Nick Clegg has taken a hammering from the public and press, the Business Secretary calls on people not to pity the Lib Dem leader.

"I don't think he needs pity, absolutely not, because he's quite a strong guy. But he has put up with an enormous amount of very, very vicious stuff, and what's worse about it, it's come from both sides. It isn't so much feeling sorry for him, just sort of feeling a sense of kinship. I've been subject to – not as much abuse as him – but a certain amount. It's relentlessly hostile. It also comes from, you know, our friends on the left." He smiles.

Ed Miliband has not made an impressive start, he says.

[He] comes across as sort of very clever but tactically smart, rather than strategic, and all this endless point-scoring I find isn't helping him or anybody else, actually. It's short term.

The Business Secretary supports fiscal autonomy for Scotland and that it should be free to set its own corporation tax, even at rates similar to Ireland's.

I think the logic of that is irresistible, if you have a devolved system. If you want power, then you have to have the responsibility, and the responsibility goes with making fiscal choices, and fiscal choices involve not just spending a block grant, which is what happens at the moment, but making decisions on how to raise revenue.

Cable also discusses the unofficial truce between him and George Osborne. "We have a businesslike relationship," he explains. Did you make a non-aggression pact? asks Cowley.

"Sort of, yeah. [But] there's no peace treaty thing. I meet him every week, have a good discussion about the current agenda. [Our pact] was not explicit, but there is an understanding. I respect the fact that we have to have a common view on the basic economic management, and he gives me a major role to play in the growth agenda, which is extremely important for government."

To read the piece in full, pick up a copy of the magazine on news-stands in London from tomorrow or subscribe.

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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