Earlier today Vince Cable gave a pugnacious speech, bashing bankers to use the tabloids’ favourite phrase, but doing so in the name of industry:

I can see Richard covering his eyes and groaning, alarmed that I may be about to embark on a round of “banker bashing”. What I can tell him is that businesses – including a lot of CBI members – keep telling me that I am not bashing them enough.

Of course, there is no point in engaging in a sterile public exchange of insults. But no one listening to the Chancellor’s statement last week will be under any doubt of the Government’s collective determination to ensure that banks act in the interests of the wider economy – and that in the New Year they don’t engage in another self-indulgent bonus round.

I do, however, agree with Richard when he says that politicians should not just criticise but describe what kind of banking system they want in this country. How should it look in five years’ time?

A guiding principle should be investing for the long-term. The model of finance that brought us to this point was disastrously short term. Securitization is a valuable innovation, but it reached the point where investments were being made with little concern for long term factors, because everyone assumed they could sell them on in liquid markets. Loans were increasingly divorced from the relationships that can make the loans work. What the Bank of England governor calls the casino part of investment banking came to dominate and in some case destabilise leading banks.

There is an important role for trading activities; for hedging in markets like foreign currency and commodities which are inherently volatile. But as Warren Buffett put it: “We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.'”

I appreciate that most banks can’t be like Warren Buffett, who when asked what his favourite holding period was, answered “forever”. In any relationship, it must be possible to seek a divorce. But we have reached a point where thousands of businesses have a choice of just three or four partners, which is clearly unhealthy and open to abuse.

So in five years time we would like a much broader choice for businesses.

On bankers’ pay, Cable made the point that radical action is supported by people who have been right at the heart of the financial establishment – and whose own records at running firms are rather more impressive than many of those who oppose action on renumeration:

To align bankers’ interests with customers it is essential that we look at remuneration policy. After all, the best entrepreneurs – many of you in this room – often have to wait many years before being able to take money out of the firms you have founded.

This is not a call for something alien to business. It is what the late Sir Brian Pitman, the long-time chairman of Lloyds bank, believed in. He believed that his bank should be run for its shareholders. But a critical aspect of that was to have an enduring respect for customers. Let us remember that Sir Brian made his shareholders very well off – and he regarded 10 years as a sensible period for measuring shareholder value.

Financial speculation also got its round of criticism:

For those who say that by crimping the banks’ style, by stopping them indulging in short term speculation, that we are somehow damaging their shareholders’ interests, I want to know: how did short termism work out for you? A glance at the share price graphs around 2008 suggests “not very well”.

He also echoed recent comments from David Cameron and others trying to move on from the focus on cuts to talking about growth:

The difficult choices we make now will determine not only our recovery but the shape of our economy for years to come. We have good examples to follow. While the crises in Sweden and Finland in the early 1990s were just as bad as what we have gone through, they – like the Asian Tigers in the late 1990s – took a path of vigorous reform and a focus on export-led growth that has left them amongst the most competitive and successful countries. Contrast this with Japan’s experience – a long standing refusal to reform, especially the banking sector, has led to persistent stagnation.

Some of his prescriptions for growth are widely shared across the political spectrum, as when he said:

The answer is partly about fostering financial stability through Government budget discipline and giving businesses confidence to invest. It is partly about removing government imposed obstacles to growth: onerous business taxes, red tape which suffocates small firms, and a slow oppressive planning regime. But it also about government doing its job properly. Doing the jobs the market does not do by itself: education and training, infrastructure provision and basic science leading to innovation.

But more specifically he talked about a government industry policy which, unlike the dying days of the last Labour government, does not try to pick particular companies to back. But also one that is more interventionist than traditional Conservative free-marketers prefer:

I am sometimes pressed to say if I share my predecessor’s enthusiasm for active industrial intervention. I made it clear when I first took up this job that there was no money left for me to run around British businesses waving a cheque book. I can’t. And I don’t believe in “picking winners” – which is neither sensible or affordable.

But we still have choices to make: about allocating the training budget; or funding certain kinds of scientific research; or promoting science, technology, maths or engineering degrees in higher education. We have to make some strategic choices. We can’t avoid that.

And it is possible to identify sectors where Britain has developed a competitive advantage in fiercely competitive markets, as the Prime Minister alluded to earlier: advanced manufacturing; aerospace; pharmaceuticals; creative industries; professional services. Some firms have benefited from Government support; most not. We can help sectors air their concerns in a coherent way – as has happened through the Automotive Council which has done outstanding work in repatriating the vehicle supply chain.

And we are helping by supporting scientific and technical research. We have also received from the Spending Review a commitment to develop a network of innovation centres based loosely on the German Fraunhofer model. And we can support training as we are doing with boosting the number of apprenticeships.

All in all it was a very different speech from one that a Conservative Business Secretary would have delivered, but the success of the policies Vince outlines depends heavily both on negotiations within the coalition (quite what will be agreed on bankers’ pay?) and on the overall health of the economy.