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Page last updated at 12:31 GMT, Sunday, 13 February 2011

Transcript of Vince Cable interview

PLEASE NOTE "THE ANDREW MARR SHOW" MUST BE CREDITED IF ANY PART OF THIS TRANSCRIPT IS USED

On Sunday 13th February Andrew Marr interviewed Business Secretary, Vince Cable.

ANDREW MARR:

Now it's time to move from retribution to recovery. That was how the Chancellor George Osborne summed up his deal with the big high street banks on lending and bonuses. A bit more lending, a bit more transparency. But a senior Liberal Democrat spokesman resigned, calling it "weak" and "waffly", and on lending the banks have committed themselves to absolutely nothing firm. Meanwhile 91 Lib Dems from local government have spoken out against the speed of the cuts and gunboat diplomacy of the Community Secretary Eric Pickles. Well I'm joined now by the Business Secretary, Vince Cable. Welcome and thank you for coming in, Mr Cable.

VINCE CABLE:

Good morning.

ANDREW MARR:

Can we just start off with the condition of the economy itself because your colleague Ken Clarke said it was "calamitous" at this stage and that people didn't understand the quantity of pain coming because they just didn't understand how bad things were. Is that a fair assessment?

VINCE CABLE:

Well I think calamitous is a reasonable description of what we inherited. I mean the economy was hit by a series of massive shocks. I mean we had the banking collapse, we had the major recession - both of them the worst since the 1930s, we had a big sovereign debt crisis that we've managed largely to avert, and now of course we're being squeezed by high commodity prices. So these are big things that the government is having to deal with (Marr tries to interject) and they involve difficult policy.

ANDREW MARR:

Sorry. I got the impression that he was looking at the situation now, however, and looking ahead to the coming year saying it was going to be a very, very tough year economically.

VINCE CABLE:

Well you can't look forward without looking back …

ANDREW MARR:

Sure.

VINCE CABLE:

… because we're having to deal with this massive deficit that we inherited. And the cuts don't take place immediately; they're phased over time. I mean that's the whole point. And I think Ken Clarke was making that point - that you know it isn't a question of been there, done that. I mean we had to make very difficult choices in relation to public sector spending. They're phased in over a period of years and they will be very difficult.

ANDREW MARR:

And do you think the middle classes are going to be shocked, as you were suggesting, by what's about to happen?

VINCE CABLE:

Well I think most people understand the gravity of the problem, which is why I think the public broadly supported the idea of a coalition - parties working together to make difficult decisions about the budget. So in that sense, I think people do understand the seriousness of it and the difficulties that we've had to encounter.

ANDREW MARR:

Central to your strategy over the next few years is economic growth and getting that from the private sector. And presumably central to that is getting lending moving again because everybody in the small and medium sized company sector complains about the lack of lending, the lack of liquidity?

VINCE CABLE:

Yeah growth is crucial, and that's why this last week I've launched major initiatives in respect of apprenticeship - in other words skill training; trade and helping small-scale companies get into national trade. But also the agreement with the banks, which is by no means a finished article but was helpful in getting the banks - including the private banks, which of course are not owned by the state - to make commitments in respect of lending to small, medium-sized companies. And it's those companies that will help us grow out of what you described as a "calamitous" situation. They are absolutely fundamental and we need the banks to lend to them, certainly the viable ones.

ANDREW MARR:

And yet the lending part of that agreement is pretty weak. I mean the banks are not signed up to absolute commitments, there are lots of loopholes, and the Financial Times said that they'd got away pretty much unscathed on all of that.

VINCE CABLE:

I think the Financial Times analysis, which I read, was that we'd got actually quite a good agreement on lending. But yes, I mean it's a two-sided arrangement. The banks have agreed to make available more money for small, medium-sized enterprise than they otherwise would have done. The government for its part is trying to step back from you know constantly threatening high levels of taxes on them, but if the banks don't deliver then the government can have a fresh look at its relation with the banks. And ultimately these problems are only going to be dealt with when we have the big structural reforms which the Banking Commission is dealing with - in other words the whole question of getting more competition, dealing with this issue about the link between the retail banks and the investment banks; these big structural questions, which are the fundamental surgery, and that's to come.

ANDREW MARR:

So when your former colleague and close friend Lord Oakeshott said that this was a remarkably "weak and waffly" agreement and that the Treasury "couldn't negotiate its way out of a paper bag", was he actually articulating what you privately think or do you totally disagree with him?

VINCE CABLE:

Well he remains a good friend …

ANDREW MARR:

Yes.

VINCE CABLE:

… and in our friendly discussions, I mean what I've suggested is that the glass is half full rather than half empty, and that some of the most important things in the discussions on the banks this week took place outside the Merlin Agreement - in other words we put on more taxes because we think the banks are in a stronger position in ability to pay more tax. And we also, the government agreed - the banks didn't agree, the government has agreed - that we'll have tougher legislation on disclosure, so we know how much the top people in the banks are actually paid and shareholders can make an informed decision about how much they should be paid.

ANDREW MARR:

And yet you must agree with at least some of what he's been saying because you were so forthright yourself about greedy bankers and so on in the past; and yet when it comes down to it, we're going to see next week a whole series of really huge bonuses being paid again. Do you regret that or do you regret what you said before?

VINCE CABLE:

No, I remain forthright about it. I mean these are extraordinarily large bonuses which most people cannot I think understand. And let's be clear what the problem …

ANDREW MARR:

(over) Inappropriately large in these circumstances?

VINCE CABLE:

I would say so, yes. But let's be clear as to why that is the case, why we would object to enormous bonuses and salaries in the banking sector but not say in football or entertainment or hedge funds.

ANDREW MARR:

I think most people understand that. What they don't understand is why you're not doing anything more about it.

VINCE CABLE:

Well I explained a moment ago what we are doing about it. What is different is that the banks are ultimately underwritten by the state. They you know effectively have a state guarantee and that's what makes the enormous payments so offensive. And in order to deal with this problem of the underlying state guarantee and banks being too big to fail, we've got to look at their structure. And, as I said a few months ago, that's where the Banking Commission, which George Osborne and I jointly set up at the beginning of this government, that's where it's absolutely crucial.

ANDREW MARR:

You have mentioned the question of structure now two or three times already, which leads me to ask whether for you it is pretty crucial to see a change in the structure of the big banks?

VINCE CABLE:

(over) Yes, of course it is. And not just for me. The Governor of the Bank of England has also been absolutely clear that this issue needs to be tackled. Now there are a lot of technical issues about how you do it, which is why we've established this group of you know very wise people to advise us, but clearly there needs to be fundamental reform.

ANDREW MARR:

So the current structures of these very, very big banks where you have the day to day banking and the … some people have called it casino banking, but the investment banking side, as part of the same organisation under the same roof, that is going to end?

VINCE CABLE:

Well it certainly needs to be fundamentally reformed. How you deal with it. As I say, we have this group looking at it. It isn't just that problem. It's also lack of competition because in the banking crisis we now have fewer big banks, much less competition - which is why the margins are so enormous, small companies paying enormous margins. We've got to get more competition into the system too.

ANDREW MARR:

So structurally, from your point of view, no change is not an option?

VINCE CABLE:

No, I think there will have to be change and it will have to be radical, yes.

ANDREW MARR:

And so will we see institutions that are visibly ordinary banking institutions, whether they're still called HSBC or whatever they're called? I mean there'll be different doors at least?

VINCE CABLE:

Well the precise mechanics of it are being looked at by the Banking Commission, and I don't want to pre-judge what they will say.

ANDREW MARR:

But it's something that you and I as customers will notice is what I'm asking?

VINCE CABLE:

Yeah, what we should notice at the end of it is that banks are more competitive and that they're safer and that they're not making large excess profits which then fuel the bonus culture. Those are the big changes that have got to happen.

ANDREW MARR:

Yes. The Swiss have frozen the Mubarak assets in Switzerland. Isn't there a case for us doing the same here?

VINCE CABLE:

Well I wasn't aware that he had enormous assets here, but you know there clearly needs to be a concerted international action on this. There's no point I think one government acting in isolation, but certainly we need to look at it. It depends also you know whether his funds are illegally obtained or improperly obtained.

ANDREW MARR:

There is a story in one of the papers that British banks have been involved in helping him get money out of Egypt and squirreling it away. Would you be concerned if that was the case and should that be looked at?

VINCE CABLE:

Well I don't know the background, but you know I would be concerned if the banks had been engaged in anything improper. I mean actually one of the things which we have done since this government got in is actually stopping the banks engaged in large-scale tax avoidance on behalf of their corporate and private customers. We've actually cracked down on that, so the logic of that would be that we would be concerned and would act if anything improper occurred.

ANDREW MARR:

Ninety-one of your fellow Liberal Democrats in local government have protested about the frontloading and scale of the cuts that they're facing, and also about the tone. They've said that Eric Pickles is guilty of gunboat diplomacy. Do you agree with them?

VINCE CABLE:

No. I think if you look at what the councils are actually saying, and there's a lot of difference between the way different councils are approaching this … I mean there are Lib Dem councils in Hull, for example, Newcastle which have dealt with this in a you know much more balanced way, trying to protect …

ANDREW MARR:

(over) But this is your own councillors …

VINCE CABLE:

(over) … taking out middle managers as a way of protecting services. Councils can deal with this in a different way.

ANDREW MARR:

So this is Liberal Democrat councils not dealing with it in a balanced way and failing. So presumably …

VINCE CABLE:

(over) No, I don't accept …

ANDREW MARR:

(over) Well you said some are unbalanced.

VINCE CABLE:

(over) I don't accept that. I think the key issue with local government and I think which these ninety-one councillors, the point they're trying to make, is that when we look at local government, what the government has done is it's reduced its central government payment as part of the cuts and we knew that was coming. What I think councillors are concerned about is if this is going to happen, they've got to have greater freedom to raise revenue themselves because that's what local government really means, and we haven't yet done that. Council tax is frozen.

ANDREW MARR:

(over) It's very unfortunate that they are being squeezed so fast, so hard without any alternatives. You can see that they've got a point there.

VINCE CABLE:

Well there is a point about the need to reform local government finance, so that local government is genuinely local, and indeed I made a statement in parliament just before Christmas about how we needed to bring back business rates into local government. It's got to be done very carefully because you don't want to destroy business growth either …

ANDREW MARR:

Right.

VINCE CABLE:

… but we are looking - we've got to do this carefully - about how councillors raise more money themselves, so they don't have to make these damaging cuts if indeed they are damaging.

ANDREW MARR:

Do you think that it's pretty much inevitable now that the top universities, the Russell Group lot, will end up paying … will end up charging £9,000 per student?

VINCE CABLE:

I don't know because they haven't put their proposals forward. But what I'm …

ANDREW MARR:

(over) It pretty much looks that way - that a lot of the top universities will.

VINCE CABLE:

Well some of them are indicating that they wish to. But they have to cross quite a severe hurdle before they do, which is that the access regulator offer, which I wrote to during this week, has to assess whether they're making adequate efforts to ensure that they have a representative intake; that they include people from disadvantaged backgrounds who have real potential. And they've really got to satisfy that test.

ANDREW MARR:

And if most of those universities did charge 9,000 quid but you had your access measures in place as well, would that be a reasonable outcome? Would you be satisfied with that?

VINCE CABLE:

No, I want the charges to be as low as possible and the future graduate contribution as low as possible. And one of the ways we can ensure that they're kept as low as possible is through these access agreements. But there are others too. I mean new providers, you know to use the jargon, are going to come in; further education colleges will supply degrees, and that will help keep down the cost. I think people are far too pessimistic about what will happen over graduate contributions.

ANDREW MARR:

(over) Less pessimism, alright.

VINCE CABLE:

(over) In a few years time, I think you'll see a different landscape.

ANDREW MARR:

Alright. Thank you very much indeed Vince Cable for joining us.

VINCE CABLE:

(over) Thank you.

INTERVIEW ENDS




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