On the Politics Show, Sunday 16 November 2008, Jon Sopel interviewed Lib Dem Treasury Spokesman, Vince Cable
Jon Sopel: This week he was awarded the Parliamentarian of the Year award at the Spectator Threadneedle lunch but given his knack for foreseeing the future it could have come from the Clairvoyant Society. Vince Cable, the Liberal Democrats' Treasury Spokesman is here now. Congratulations on your award.
Vince Cable: Thank you.
Jon Sopel: Washington over the weekend. Has anything substantial emerged from it?
Vince Cable: Not substantial, but there are important symbolic things. First of all you've got the Chinese and the Indians and the Brazilians sitting round talking about the world economy. It's no longer just a club of rich and white countries. That's very important. And also the fact that rich countries are not fighting each other. If you remember the 1930s we had economic warfare, protectionism, there's a real danger of that, so that fact that they're talking together, working together, heads off that danger. But we're not talking about serious detailed regulatory reforms.
Jon Sopel: When they get to that is it going to be the Brown Plan. Is Brown the leader of this group?
Vince Cable: Well he's, the British initiative is the one that's got the running, particularly as the American Paulson plan has collapsed. So yes, some version of the recapitalisation of banks is the model that a lot of countries are choosing, but I think perhaps what the other countries are not aware of is the extent to which that approach is running into problems here. I mean it was not very much reported but last week Alistair Darling said there would be no government directors of the semi-nationalised banks. The banks have been given all this money, they're now going to be given a completely free reign, and that's absolutely outrageous because the banking system is completely gummed up.
Jon Sopel: Just on the banks, you don't think the banking crisis is over yet?
Vince Cable: No it isn't. I mean it was necessary to do what the government did, it was necessary to put the money in, it was necessary to guarantee the inter-bank lending, but what I pick up from the businesses that I talk to around the country is that they're finding it impossible to get credit and if they can it's on outrageous terms, and some of the banks are jacking up interest rates enormously to their borrowers, their business borrowers, perfectly sound customers. And the banks are hoarding capital, they're not lending, and this is one of the factors that's making the recession much worse. And the government simply cannot walk away from the responsibility that it's taken on.
Jon Sopel: Let's stay with some of the things that are going on with individual banks, because LloydsTSB shareholders, I think, vote this week on proposed merger, takeover, whatever you want to call it, of HBOS. Now you were initially supporting that deal and now you've moved against. Why? Are you playing politics with this?
Vince Cable: No. I have an open mind, actually, and I think the government should have an open mind as to whether there are any viable alternatives. I supported the original proposal before the major government intervention in the banking system, because it was the only way then of preventing a complete collapse of HBOS. It would have gone down and the Lloyds bank intervention was a way of stopping it. The position has now changed because the government is now putting money into both banks on a very large scale. There will be a substantial contraction of competition, we're building up a massive bank for the future with semi-monopolistic powers, and I think questions do now need to be raised as to whether the original rationale still holds, and if other people are prepared to come forward with feasible ideas, and there are serious bankers out there claiming they have got them, the government's got to be willing to look at them.
Jon Sopel: I just want to ask about a couple of other quick points while we've got time. Tax cuts, fiscal stimulus, or whatever the codeword is for it. What is the scope for that, and how quickly do you think people will be feeling that in their wage packets? We spoke to the Chancellor and he was understandably a little wary to answer that question too directly.
Vince Cable: Well if the idea of a tax cut means anything in the present, if it's going to restore confidence, willing to spend again in the shops, it's got to be substantial, so we're talking, what, 15, 20 billion, something of that kind. The proposal we put forward is the idea of cutting taxation on people of low and middle incomes, probably by raising thresholds, for example, but we would fund it, and we would argue that people who are very wealthy and currently enjoy favourable treatment in respect of capital gains or state pension contributions, should pay for it. So it's a funded cut.
Jon Sopel: And on exchange rates, are politicians allowed to talk about this, because the Shadow Chancellor George Osborne has come in for a bit of a kicking for raising the fact that there does seem to be a run on the pound and a run on the dollar.
Vince Cable: Of course politicians should be allowed to talk about it. This shouldn't be some kind of secret business, of course there's nothing wrong with George Osborne talking about it. I mean what he said wasn't terribly well-judged, I mean he didn't seen to notice that we've already had a substantial devaluation, I think by a third against the dollar and a quarter against the Euro. And the economic logic of what he was saying isn't at all clear. If we are moving towards a world of fixed exchange rates, if that's what he wants, then it raises the whole question of the Euro, which of course the Tories have got a blind spot about. I mean I'm all for having an intelligent discussion about exchange rates, it just wasn't a very good way of dealing with it.
Jon Sopel: Okay Vince Cable, we must leave it there. Thank very much for being with us.
Vince Cable: Thank you.
END ON INTERVIEW
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The Politics Show Sunday 16 November 2008 at 12:00 GMT on BBC One.
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