Vince Cable’s speech to conference

A few key quotes from the speech:

  • Vince Cable speakingOne of our central aims as Liberal Democrats is to show that coalitions work. And Nick Clegg’s major contribution as leader has been to do just that.
  • I believe we need an industrial strategy – a positive and ambitious vision, built around long-term investment in innovation, skills and science.
  • We must now implement the ‘pioneering’ coalition policy of splitting the investment bank casinos from mainstream personal and business banking, as in the Vickers report. Without Liberal Democrats in government you can be absolutely sure this would not have happened.
  • We need a new British business bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high growth companies that power our economy. Today I can announce we will have one.
  • I know some of you hanker after a Hollande-style assault on top incomes. But we know that very high marginal rates of income tax are counter-productive. If I were advising Monsieur Hollande, I would recommend a ‘chateau tax’ – for those of us who never even managed a dumbed-down GCSE in French, that means a ‘mansion tax’. Core Lib Dem policy. A first step to the proper taxation of wealth and land. It horrifies the Tory backwoodsmen but it is popular and right. The super-rich can’t move their chateaux to Monaco or Switzerland so let’s get on with it and tax them here.
  • Our critics on the left say – “cut more slowly”. The government has already extended the period to eliminate the structural deficit from four to six years. Yet Ed Balls says: “workers of the world unite. We need a Plan B. We should not cut the deficit in six years but seven”.
  • What we need is an aggressive programme of house building by housing associations and local councils, with government providing guarantees so they can build, in large numbers, now. We need an extra 100,000 houses a year to meet demand. That would create half a million new jobs.

Here’s the speech in full:

If you attend conference regularly you may remember five years ago. We were interrupted by news of the collapse of a small bank in Newcastle. That was the beginning of a terrible economic storm which rages to this day. It has left behind broken banks, lower living standards, ballooning budget deficits, job insecurity and a sense of permanent crisis.

In a time of crisis what the country needs is national government. That means working with political opponents in the national interest. Indeed, one of our central aims as Liberal Democrats is to show that coalitions work. And Nick Clegg’s major contribution as leader has been to do just that. At a time of crisis, Coalition government was and is still the only way forward – and it required considerable political courage from Nick to make it happen.

For myself, I take pride in the fact that my department in government has two Lib Dem ministers – and I’m absolutely delighted to have Jo Swinson as a minister – and five very able Conservatives, led by David Willetts, working well together as a team.

Many of the decisions we face – on banks, industrial strategy, climate change – go way beyond the limitations of one party or one parliament. That’s why I also make sure that I have good communications with politicians across the political spectrum.

But I do confess that I occasionally lapse into party political tribal thinking. What has sustained me, in my darkest moments, has been the Daily Telegraph poll showing I was the Cabinet Minister who Conservative activists most wanted to evict from Government. Sadly I recently discovered that I had lost my badge of honour to not one but two conservative colleagues.

But more seriously we will ultimately be judged by the Government’s handling of the economic crisis.

I am at heart a realist, and deep down, an optimist. We can’t recreate the fool’s paradise of the pre-crisis era; but we are perfectly capable of sustainable growth in this country.

To that end, I believe we need an industrial strategy – a positive and ambitious vision, built around long-term investment in innovation, skills and science. We are so good at so many things in this country – but for too long the mirage of growth based on property speculation and financial gambling has hidden the harder virtues of making things productively. We must get behind successful British-based firms in vehicles, aerospace, life sciences and creative industries and our world-class scientists and universities.

I have been working at the heart of Government to make this happen. Despite spending cuts, we have increased apprenticeships by over 60%. We launched German-style innovation centres so that British industry can access the newest technologies in advanced manufacturing, bioscience, sustainable energy, and digital. We are bringing lost supply chains back to Britain. The Green Investment Bank is now up and running, financing the green industries of the future.

We have had some real successes. Working with the American chiefs of General Motors and British trades unions to save thousands of Vauxhall jobs in the North West. With the Indian owners of Jaguar Land Rover to create in the west Midlands a global hub for design and vehicle engineering. Boosting research to keep Britain as the second aerospace economy in the world. Working with Siemens and others to develop offshore renewable engineering in Hull: a key low carbon industry.

There are some common threads: understanding that markets fail and that governments can and should sensibly intervene and support enterprise; and a will to fight the British curse of short-termism – both in the corporate world and in government.

Industrial strategy can only work if finance supports business investment and growth. Currently it doesn’t. Our leading banks are often anti-business especially anti small business. They threw traditional relationship banking over the side and sold useless insurance and dodgy derivatives instead.

Public anger at the greed and stupidity in this industry will continue for a long time. But I am looking forward to and I want to work with the new generation of sensible bankers to support the real economy.

We must now implement the ‘pioneering’ coalition policy of splitting the investment bank casinos from mainstream personal and business banking, as in the Vickers report. Without Liberal Democrats in government you can be absolutely sure this would not have happened.

There is still so much to do. Four years ago only a massive taxpayer bailout stopped RBS from dragging the whole economy over a cliff. Two years ago there was talk of an early sell off. That is history. It has been a drifting, rudderless hulk but is now getting more shipshape. And it needs direction from us – we own it – to get up steam, and to lend more to support British business.

This is no time for the state to be stepping back. We need a new British business bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high growth companies that power our economy.

Today I can announce we will have one. I am working with the Chancellor to develop a new institution that will combine a billion pounds of new government capital with a larger private sector contribution. This will apply leverage through guarantees to support up to ten billion pounds of finance to small and mid-sized business – a significant portion of all the lending currently available.

Industrial strategy; reforming the banks; these are parts of a bigger project: creating a culture of responsible capitalism. I launched a debate on this issue at conference two years ago, you may remember when I echoed Adam Smith saying that ‘Capitalism takes no prisoners and kills competition when it can’; this led to loud moans about Communists in government. Now everyone has seen the scandals of market rigging, mis-selling and phone hacking; the abuse of monopoly power; and the outrageous rewards for failure.

Despite all of that we must work within a market based, private enterprise system. Business will drive our recovery. And there are many outstanding and responsible British companies.

In two years we have done a lot to support them. Our legislation to introduce binding shareholder votes on executive pay is progressing through Parliament. We are scrapping unnecessary red tape on small business while strengthening regulation where it is necessary – as on the environment. We are getting more women into top business positions, on boards. And we have seen off the ‘head bangers’ who want a hire and fire culture and seem to find sacking people an aphrodisiac: totally irrelevant in a country with flexible labour markets which have created over a million private sector jobs in the last two years. Instead, we have concentrated on practical tribunal reform and supported progressive firms who want worker participation and share ownership.

Furthermore, we want the costs of our current crisis to be fairly shared. ‘We are all in it together’ is a good slogan. Forget the Tory messengers; let’s apply the message. Cracking down hard, not just on criminal tax evasion but on abusive tax avoidance. Working with our allies to close down tax havens. No one keeps their cash in tax havens for the quality of investment advice; these are sunny places for shady people

There could be no better time to promote our Party’s commitment to progressive taxation. We have lifted tax thresholds: taking 2m, lower paid workers, mainly women, out of income tax and cutting taxes for 20m on average pay. But the very wealthy have so far got off lightly.

I know some of you hanker after a Hollande-style assault on top incomes. But we know that very high marginal rates of income tax are counter-productive. If I were advising Monsieur Hollande, I would recommend a ‘chateau tax’ – for those of us who never even managed a dumbed-down GCSE in French, that means a ‘mansion tax’. Core Lib Dem policy. A first step to the proper taxation of wealth and land. It horrifies the Tory backwoodsmen but it is popular and right. The super-rich can’t move their chateaux to Monaco or Switzerland so let’s get on with it and tax them here.

Now you might say: “That’s fine. But how do we get out of the present mess?”

We are in a dangerous phase of the crisis as consumer spending is squeezed by falling real incomes and debt and exports to the European Union are hit by the Eurozone crisis.

Our critics on the left say – “cut more slowly”. The government has already extended the period to eliminate the structural deficit from four to six years. Yet Ed Balls says: “workers of the world unite. We need a Plan B. We should not cut the deficit in six years but seven”.

Our critics on the right say that all we need is supply side reform to liberate the animal spirits of business. Of course we need and value entrepreneurs. But no amount of push from supply side reform can possibly succeed without the pull of demand.

Other critics say, “why not borrow more when interest rates are so low?”. Actually that is what we are doing: absorbing the slowdown and restoring some of the savage cuts in capital investment made in the last year of Labour government. So borrowing has been allowed to rise – this is entirely sensible in an economic downturn. I have great personal sympathy for the Chancellor who is being attacked for borrowing too much, and borrowing too little, at the same time.

Actually it is not a matter of Plan A versus Plan B or Plan C or even Plan V. Plan A+ is OK by me or plan A++ if you prefer. When we came into government we had to balance competing risks: of aggravating the economic downturn through excessive cuts versus the risk of losing the confidence of lenders. I believe we struck the right balance and adopted a deficit reduction plan. I make no apology for my continued support for that fiscal discipline.

But right now we are fighting recession. The need is for a demand stimulus. And that does not just mean pumping more money into the banks. That great Liberal Keynes had exactly the right analysis of the problem we now have – not enough spending power in the economy. And not only him – but also the International Monetary Fund, who no one could accuse of financial irresponsibility and the coalition understands this very well.

One big step will be carrying out our commitment this month to get more houses built. The numbers of houses completed are currently the lowest in peacetime since the 1920s. Millions of families are in housing need. There is distress in the construction industry. The private market will only heal slowly. Because mortgages are scarce. What we need is an aggressive programme of house building by housing associations and local councils, with government providing guarantees so they can build, in large numbers, now. We need an extra 100,000 houses a year to meet demand. That would create half a million new jobs.

The central point is that the country must not get stuck on a downward escalator where slow or no growth means bigger deficits leading to more cuts and even slower growth. That is the way to economic disaster and political oblivion. We will not let that happen.

There is still time to turn the economy around. Last year I talked about the economic equivalent of war. We mean to win it.

I have talked about our national imperatives. But this is a party conference. I know many of you worry that while we do what is right for the country, the party is suffering for it.

But think about our opponents. The Labour Party currently has reasonable poll ratings. We know from their union funded campaigns against us in Northern cities that Labour can still be a ruthless political machine. But it used to be a lot more than that. It once had a soul and new ideas. Then we had 13 years of rootless New Labour. A hard earned reputation for economic competence disappeared under the rubble of collapsing banks. Their party’s long standing commitment to individual freedoms was buried in a graveyard of civil liberties. Principled foreign policy was laid to rest in Iraq. They have scarcely begun the long march back from there.

Most of our MPs will face Conservatives at the next General Election. They face the enticing prospect of a Tory split.

We are not like that. We have unity in adversity. Liberal Democrats are not in hock to fat cats or union barons and media bosses. Nor will we be bullied by them. We remain willing to work with other parties in the wider national interest. We fight for liberal and social democratic principles just as strongly inside government as out.

After over two years in government we are battle hardened but certainly not war weary. None of us knows exactly how it will end. But we all know we must fight the next General Election as a totally independent, national, credible challenger for power.

I don’t believe tactually that he British people will want to entrust their future to any one party next time. If Britain wants sustainable growth, competence with compassion, fairness with freedom and more equality not ever greater division: then that government must have Liberal Democrats at its heart.

* Mark Pack is Party President and is the editor of Liberal Democrat Newswire.

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8 Comments

  • Geoff Crocker 24th Sep '12 - 2:06pm

    The positive constructive parts of this speech to stimulate areas of undoubted excellence in British industry are good stuff in the Wilsonian tradition. The characteristic jibes at Vince’s favourite bete-noires detract from this, and would be best deleted. I am not a Tory backwoodsman or super rich but I do not support a mansion tax. Is it ‘core Lib Dem policy’ or just Vince’s policy?. Property taxes are unfair. People buy their houses out of taxed income, so to tax the house again is double taxation. If Vince wants to tax rich foreigners then he should propose a tax which doesn’t hit UK houseowners twice. And he is wrong about austerity. Debt is inevitable in technologically advanced economies, and the only solution to maintain demand in the economy is a citizen’s income funded outside the PSBR.

  • Vince comes across as very believable, honest and as someone you want to hear what he has to say.

    Sure he has made some mistakes in the past, what with the Tuition fee’s , but then I believe personally that Vince was stitched up, being forced to defend and introduce a Tory policy that would humiliate the Libdems.

    I never really understood why universities is part of the department of Business and not Education.

    I do not think Vince got everything right, after all before the election he spoke of lower and slower cuts to support the economy, instead of the deep cuts that he has now advocated.
    He also supported Labours spending before the banking crisis and Liberal Democrats would have matched that spending.
    However, overall I think Vince is the most believable and trustworthy and the public are more than happy to forgive his mishaps. I do not think Vince goes out there to intentionally mislead unlike others.

  • Richard Dean 24th Sep '12 - 11:06pm

    I thought this was a rather disappointing speech. Mainly air.

    INDUSTRIAL STRATEGY. Sure we need one. But did Vince give an idea of what it might be? No! The vision seems to be limited to “long-term investment in innovation, skills and science”, which is not exactly new, or “getting behind” British industry – also not new, and what does “getting behind” really mean and why were most of the big companies he mentioned were foreign-owned? Every government of every persuasion says these things and that they are “scrapping red tape”.

    RECOVERING. Separating investment banking from consumer banking is not a way “out of this mess” – it’s a long term thing. No examples were given of how we “supported progressive firms who want worker participation and share ownership”. Perhaps we do need a ” new British business bank with a clean balance sheet and an ability to expand lending rapidly”, but apparently it’s “being worked on”, which can mean it’s just been thought of yesterday and is 5 to 10 years away at least. Have the risks associated with this been properly assessed, or its effect on other banks? Perhaps we do need 100,000 houses, but this speech specifically doesn’t say that the government is doing something to get them.

    CUTS. Again covering the error of four years initially, six years now by spinning it into “listening to people” and joking about Labour’s seven. No real promises about not cutting where it really does hurt – at the bottom. Just a general statement about a “downward escalator “.

    Personally I think mansion tax is unfair and I think many ordinary people do too. But anyway it’s again being floated as an idea with no really concrete proposals of how it will work. Ok there was a good point – increasing apprenticeships, but overall I found this speech very disappointing. Perhaps the country and the government is in such dire straits that it’s the best that anyone could do – a speech to help prevent panic rather than one to lead forwards? Or perhaps “None of us knows exactly how it will end” is an admission that we really don’t know what we’re doing after all.

  • Richard Dean 25th Sep '12 - 12:39am

    Back in the old days, an entrepreneur would put his or her entire savings and wealth on the line as collateral for a loan for his business. It gave a great motivation to do whatever it took to succeed. There were of course many failures, and so this also provided some justification for successful entrepreneurs being able to reap relatively large rewards.

    In stark contrast, on BBC News tonight, and entrepreneur described how he thought it was so unfair that banks had asked him to put his house up as collateral for a business loan. He wasn’t about to take risks with his wealth, but he wanted others to, because that’s what a bank loan does – put depositor’s money at risk.

    Well I give up, it’ just so different to the work ethic I was taught, but at least I now understand why banks won’t lend money. And perhaps I even sympathize with Vince. If all entrepreneurs are as pusillanimous as this one, there’s no real hope. Without collateral, this one will have no qualms at all losing those depositors’ money, and will happily lose the money the new government business bank makes available too.

  • Richard Dean

    I saw that too and found it very strange that the ‘entrepreneur’ was not prepared to risk his capital – he was almost incredulous at the thought of it.

  • Peter Watson 25th Sep '12 - 7:55am

    @matt and Richard Dean
    I shared the sense of disappointment in Cable’s speech – it seemed very flat – , especially the 4 vs. 6 vs. 7 years spin.
    The coalition set out to reduce the deficit in 4 years, but the target slipped to 6 years because the plan was failing – maybe because of a hawkish approach to the economy damaging consumer confidence. Labour’s 7 years is closer to the policy we recommended in 2010. Yet for some reason Cable chooses to make a joke to remind us that we have been unsuccessful in implementing something we thought was wrong before the election and that maybe Labour is right. Strange world.

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