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I’ve spent the last week glued to the television. I hardly watch any normally, so this is enough to feel pretty exhausting. There is some opposition already about the coalition government, but – for some aspects at least of the new economics – it seems to me to open up some thrilling possibilities.
Yes, I am also a Liberal Democrat (I think I ought to declare my political leanings at this point) so my heart is bound to leap a little at the thought of Liberals being in government for the first time for 65 years.
But even if I wasn’t, the cancellation of the Heathrow third runway – in the face of all those corporate lobbyists, and all that money – would be enough to make me prick up my ears.
For the emerging new economics, there are at least four areas where things may now move quite fast:
- Tackling the banks: Vince Cable will be doing more than just putting in place the banking levy, the coalition agreement has set out a path towards breaking them up – and creating a more diverse, local and mutual banking system.
- Localism: it wasn’t clear whether there was anything behind the Conservative commitment to localism. Now there is: the coalition has committed itself to large scale decentralisation of power.
- Low carbon economy: did Cameron know what this was when he used the phrase? That isn’t clear. Why did Clegg repeatedly use the phrase ‘green sustainable growth’? That isn’t clear either. It is up to us to define it on their behalf, but it is clear that the political will is there for a major shift.
- Co-production: the same applies to the so-called ‘Big Society’. It wasn’t clear if there was any thought-through policy to support it. Now there is a commitment to devolve power to communities, and – if co-production is not explicitly on the agenda – there is a hole in coalition policy shaped like co-production.
But for some of these, if not all, the political rules have now changed. Two of the new cabinet in particular now control both elements of a potential Green New Deal, Vince Cable and Chris Huhne. But if Cable acts on radical reform of the banking system, he will do so in the face of bitter opposition from the City of London and elements among bankbench Conservative MPs.
What he, and those like him, are going to need is explicit political support – as well as research, information and basic cheerleading – if they are going to be able to press forward their ambitions.
Those of us in the voluntary sector, or in campaigning NGOs, who have become used to simply demanding things of politicians, are going to need to develop a more sophisticated strategy.
We are going to encourage and then protect those ministers capable of creating a new economic revolution. Tackling the banks and building a low-carbon economy is a matter of co-production, and our side of the work starts now.
It looks likely that while George Osbourne will take the job of Chancellor of the Exchequer, Vince Cable is being assigned a role looking after business and banks, although details are understandably sketchy at this stage.
From nef‘s perspective, Cable could be an excellent choice for this kind of role, as he appears to be dedicated to at least some structural reform of the banking sector. During the election campaign, Cable spoke out against the cartel of big banks in control of the financial sector, calling for them to be broken up. He also seems to be in favour of a levy on the banks – possibly a financial transaction tax.
Perhaps most encouragingly, Cable wants to encourage the local financial sector, including local enterprise funds and regional stock exchanges, which will help reconnect banking with the high street economy and small businesses. He’s also in favour of our plans to create a People’s Bank at the Post Office. Speaking in at the parliamentary launch of the Post Bank campaign, Cable said, “The Post Bank is an attempt to clean up banking. This is a cleaner principle based on sound banking ideas, but driven by public interest rather than narrow short-term profits.”
Obviously, in a coalition compromises may come, but let’s hope he holds true to principle and pushes for the kind of far-reaching reordering of the financial system that will kickstart the economy and tackle financial exclusion.
UPDATE: More on Cable’s likely moves are outlined by the Guardian, including what looks like taxes, curbs on bonuses and moves towards breaking up some of the banks. There’s a rather revealing comment as well from David Buik, City commentator at BGC Partners:
“Lovely bloke he may be, but the thought of Vince Cable, as Treasury Secretary, bringing influence to bear over the banking system and its constitution fills me with horror. This is nightmare material and I must head to the chemist for some barbiturates! I never voted for this and nor did millions of others.”
Of course, none of us voted to bail out the banking system with no strings attached. We’re going to have some serious moral hazard on our hands if those working in the financial sector think that they can continue to walk the highwire of speculative risk knowing that the safety net of public money is always below them.
Debt-fuelled over-consumption is a model broken beyond repair, both economically and environmentally. But which potential chancellor is closest to understanding this, and has the vision to deliver an alternative?
Is it Alistair Darling, who gave the minimum nod necessary on curtailing banking excesses to appease public anger, and seems bent on returning to business as usual? Is it George Osborne, sliding effortlessly into the old Conservative comfort zone of quick, punishing public spending cuts? How quickly people forget that the cuts agenda is driven by a massive private sector, market failure. Or, is it Vince Cable who, of the three, first called the banks’ failure and is most outspoken on reform?
All different, but for all, the future is a just question of when, not if, to make huge spending cuts. None fully sees the big win-win opportunity for major, productive, counter-cyclical public investment in a Green New Deal. It’s the one vision that could create jobs, and build a national housing, energy, food and transport infrastructure fit to flourish in a world of energy shortages and climate change.
So, my vote for next Chancellor goes to Adair Turner, former head of the Confederation of British Industry, chair of the official Climate Change Committee, and now leading the Financial Services Authoriry. He knows the market is often invisibly underwritten by the public realm, sees through the City’s attempts to defend the indefensible and understands the need and benefits of the great economic transition we have to make. He could be the first independent Chancellor, taking office in a hung parliament, symbolising a new politics.
The weekend papers reported that Vince Cable is in talks with HM Treasury about becoming Chancellor in the event of a hung parliament. Cable has been widely touted as the most trusted politician in the country, and would most likely to be a progressive choice for Britian’s economy, given his support for policies such as the Post Bank and the Robin Hood Tax.
But would Vince ever take the most radical step of all, and question whether economic growth is really the best compass to guide the progress of nations?
Sadly, it seems not. Speaking at a confrence last week, Cable took a swipe ‘environmentalists who advocate de-growth’. Explaining why environmental issues have slipped down the list of public priorities in recent months, the Shadow Chancellor for the Liberal Democrats said:
well, we’ve got zero growth in fact, we’ve got minus growth and it isn’t very nice. And I think people somehow wised up to this idea that all this puritanical non-consumption of resources we were being told was a good thing is actually really rather painful if you’re one of the people who was losing your job in the process. So recession has played very badly in terms of its environmental impact.
(Thanks to @adanylkiw for the transcript)
Vince Cable was quite right on the Today programme. The response to the RBS director’s threat to resign if they are not allowed to pay the bonuses they want to their failed, cash-strapped, state-owned bank should be to say: go ahead.
But we need to look a little more closely at the business of banking bonuses. They are paid out of a percentage of the profits of the investment divisions, sometimes up to fifty per cent. The money would otherwise go to the shareholders – the same ones who failed to exercise proper control over the bank they owned.
There are some, and Fortune magazine is among them, who would say that they are better shared with the staff than shovelled at the owners – and that’s right as far as it goes.
But the real question is not why the bonuses are so high. It is why the profits are so high. They come, after all, out of all of our pension investments, or the debt that goes to build productive business, or capital investments in public infrastructure. The real scandal is that these bonuses are paid out of fees which ought rightly to stay with the small investors who are watching the value of their pensions falling.
The fact that the banks are able to award themselves such hefty fees is purely because we have allowed a semi-monopoly to build up in banking, both domestic and investment banking. So here is the real solution: slash the bonuses, accept the resignation of the directors, put in their place bankers who are prepared to do what is necessary to break up RBS into its constituent businesses and regions.