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25 May 2011

The Vince Cable interview

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

By Duncan Robinson

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.

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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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