‘Twickenham’s Karl Marx’ still relishes the political fray at 68 and is determined to push state’s role in reshaping Britain’s economy
Thatcherites will be appalled. Michael Heseltine, the man who brought down their heroine, has returned to Whitehall where he is working happily alongside Vince Cable. “Michael Heseltine has an office down here,” the Liberal Democrat business secretary says as he waves in the direction of a long corridor on the top floor of his department.
With a mischievous twinkle in his eye, Cable explains why he is working so well with the One Nation Tory who promised to intervene before breakfast, lunch and tea when he held the same post in the 1990s. “Michael’s very much up for this pro-active [approach] and he’s been very supportive,” he says.
Cable is invoking Heseltine to illustrate the mission he will be launching at the Liberal Democrat spring conference in Gateshead this weekend – to explain that the state matters and it must be allowed to play a central role in helping reshape the economy as Britain recovers from the downturn. “Government has a role to play, a positive role,” he says.
It is no great surprise that Cable, the most senior Lib Dem to have harboured initial doubts about entering a coalition with the Conservatives, has Tories to the right of Heseltine in his sights.
But Cable also makes clear that he is making a stand for his wing of the party – the Social Democrats, many of whom started their careers in the Labour party. Cable, 68, who first worked in his department as an adviser to the late John Smith in the 1970s, says: “Our party has a Social Democratic tradition and we believe government can do useful things.”. Cable is too polite to breathe a word of criticism of the other wing of his party – the Liberal tradition, often represented by the younger generation around Nick Clegg, which is seen as keener on free market economics. But the business secretary makes no secret of where his sympathies lie.
“There are two traditions,” he says. “There’s the Liberal tradition which is good and I identify with it. But there’s a Social Democratic tradition as well which is about fairness and recognising a role of government and I’m perfectly proud to promote it.”
By turning on the Tory right and giving a gentle hint that he and Clegg are no soulmates – all within the space of a few minutes – Cable shows he still relishes a political fight. At an age when most men would be reaching for their slippers, the business secretary has experienced a busy week in the headlines, some of his own making, others not. In his first intervention of the week, Cable announced on the Today programme on Tuesday that the Lib Dems were prepared to agree to the scrapping of the 50p tax rate. But this would have to be in exchange for moves towards taxing wealth, preferably in the form of his party’s “Mansion Tax” on properties worth more than £2m.
Then, later that day, the BBC published a leaked copy of a letter by Cable to David Cameron and Clegg in which he said that the government had no “compelling vision” beyond tackling the fiscal deficit.
Cable, who insists that the letter was not leaked from his office, is not in the slightest bit fazed. The letter, he says, goes to the heart of his argument.
“We’re no longer arguing about fiscal policy – monetary policy’s now taking on most of the heavy lifting anyway,” he says as he notes that Labour has now accepted the need for fiscal discipline. “So the argument has shifted into a debate around how active government should be in promoting the recovery. Is it getting out of the way or is government being proactive and positive? That was the purpose of that letter to the prime minister which set out the case.”
It may have been an accident but the letter was sent to the prime minister on 8 February, five days after Chris Huhne resigned from the cabinet. Cable now believes that he has to work hard to fill the gap left by Huhne. He was the only other ex-SDP big beast in the cabinet and is, as even his enemies will acknowledge, a supreme political strategist. Cable will now press hard in government to differentiate the Lib Dems from the Tories, though he will do this more diplomatically than the bruising Huhne. One area where Cable will be speaking out is over the proposals in the report by the venture capitalist Adrian Beecroft – commissioned by the prime minister’s departing policy guru Steve Hilton – which said that micro-companies employing fewer than 10 people should be able to sack employees without compensation.
This shows he is prepared for a confrontation with the chancellor. George Osborne invited British manufacturers at their conference this week to send evidence making the case for Beecroft’s proposal for “compensated no-fault dismissal” for micro companies.
Cable says he will examine the evidence in a “very practical, very businesslike way”, though he has no time for Tories who believe Britain is over-burdened with business regulation. “It is ridiculous,” he says of the call by Liam Fox for greater labour market deregulation on the grounds that it is “too difficult to hire and fire” employees.
The business secretary says that he and his ministerial team – two Lib Dems and five Tories – are pressing ahead with deregulation as they ensure that new measures can only be introduced if an old one is ejected. But he cannot resist pointing out that one little-noticed proposal in the Beecroft report – easing immigration checks for new employees – was rejected by the Tories. “We thought that was great,” Cable says of the Beecroft proposal on immigration.
But a Tory whispering campaign against Cable shows no signs of abating. Senior No 10 figures say the Beecroft report was commissioned to counter the business secretary after his warning in 2010 that “capitalism takes no prisoners and kills competition where it can”. Far from finding himself cast out, however, Cable ended up shaping the centre ground as his warnings about unregulated markets were embraced a year later by Ed Miliband and then by the prime minister.
As his opponents mocked Cable as Twickenham’s answer to Karl Marx, the business secretary set to tame, though not bring down, capitalism. He pressed for legislation on the findings of the Vickers review on ring-fencing retail and investment banking and fought hard to give shareholders a greater say on executive pay.
As the debate on responsible capitalism moved in Cable’s direction, he set up the Kay review to address the perceived failure of equity markets to think about long-term investment. Cable is enthusiastic about the initial findings by the FT columnist Professor John Kay, as he endorses one of Kay’s early recommendations – an end to company quarterly reporting. “It’s not clear that it gives us any value and it takes a lot of time and it really does focus managers on short term thinking. There is also a lot of hostility to it in business.”
Cable has summoned Tim Breedon, the chief executive of Legal & General, to find ways of channelling longer term financial investment for infrastructure projects and for small and medium-sized enterprises. Cable is impressed by Germany’s state-owned KfW bank which provides, as he said this week, a “Heineken effect” that reaches “parts of business that other markets don’t reach”. But Cable is distancing himself from the proposal in his own leaked letter that Royal Bank of Scotland should act as a state investment bank. “It’s not quite as revolutionary as it may have sounded,” he says. “But [it is] quite difficult to use RBS as a vehicle.”
Cable also wants to focus on a multi-billion social house building programme funded by the non-banking private sector. “Housing associations have fingered the fact that they cannot use their assets as liquidity due to Bank of England rules unlike their continental equivalents. This has emerged to be one of the main bottlenecks to getting investment going in the UK. It is a Bank of England issue. Their rules are actually stopping them raising capital and actually getting on and doing things.”
The housing shortage prompts Cable to draw an unfavourable comparison with the 1930s. “I’m very struck with the comparison between this crisis and the 1930s. A lot of the recovery was powered [then] by housing including a lot of council housing. And this is proving much more difficult this time. “
The Lib Dems meet in Gateshead at an anxious time as they see their support trail at least 10 points behind their general election performance. “There’s been some churn in support,” Cable says as he admits that the party has been punished by voters on the left. But he insists that all is not lost. “The situation has stabilised and improved.”
Cable is also sure that he is not on his own as the only ex-SDP member in the cabinet. “I certainly don’t feel isolated,” he says.