guardian.co.uk,
Tom Clark, Saturday 24 March 2012
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| Vince Cable suggested not a time-limited role for a nationalised bank, but a 'permanent' one. Photograph: Peter Macdiarmid/Getty Images |
Vince Cable
has sent a clear signal that rows within the coalition over banking could soon
come to a head. Discussing the state of the economy with the Observer's Will
Hutton at the Guardian Open Weekend, the business secretary said that a moment
was approaching where policy towards the financial sector would "have to
go one way or the other".
Cable said
the choice was between "a permanent role for the state in banking" or
instead moving to "sell off the state-owned banks and promoting
competition" and trying to encourage loans to cash-strapped small
businesses using market forces instead. And in remarks that could infuriate
some Conservative colleagues and the Treasury, he added that "my instinct
is towards the former".
Ever since
the state acquired first Northern Rock and then large stakes in HBOS and RBS,
the official policy has been focused on getting a good sale-price for these
assets. But in a private letter (pdf) to David Cameron and Nick Clegg last
month, which was leaked to the BBC, Cable argued that the government needed to
recognise that "RBS will not return to the market in its current
shape", and that the bank's "time as a ward of the state [should be
used] to carve out … a British Business Bank with a clean balance sheet and a mandate
to expand lending rapidly to sound businesses".
Instead of
downplaying these private discussions on a public platform, Cable went further
by suggesting not a time-limited role for a nationalised bank but a
"permanent" one.
After
spending Friday at the Federation of Small Businesses conference in
Scarborough, the business secretary's thinking is influenced by the continuing
difficulties that smaller companies are having in raising finance. A recent
report he commissioned from Tim Breedon, the chief executive of the finance
company Legal and General, warned that there could be a shortfall of £190bn in
small and medium enterprise finance by the middle of this decade.
Cable
explained on Saturday: "I could do my usual bash the banks thing, but it's
all very difficult because we are telling them to do two contradictory things –
rebuild their balance sheets on the one hand, and increase their lending on the
other."
He sees a
state-owned bank which could be directed to lend while being backed the state's
balance sheet as the way to reconcile the two.
Since the
credit crunch, Whitehall has already got involved in providing finance far more
actively than before, most recently through George Osborne's "credit
easing" scheme. But Cable said Osborne's initiative would do "modest
things at the margin".
At the end
of a week in which there have been rumours on Twitter that Nick Clegg may now
be persuaded that it would be better for Cable to be outside the cabinet, the
business secretary did not shrink from spelling out his views on issues that go
well beyond his narrow departmental brief. Asked about a suggestion that the
Bank of England's mandate to tackle inflation could be replaced by a broader
target of national income, or more specifically "nominal GDP", Cable
said: "I am attracted by it."
He said he
could not go further or he would set hares running about recasting
macroeconomic policy in the press. Even so, Osborne may be displeased about
this encroachment into a field which is a Treasury responsibility.
Cable also
revealed some of the frustration he feels at being in government. He said
"arid" statisticians were thwarting ambitions for using the public
balance sheet more aggressively to support industry. And he said that the
decision to make the Office for National Statistics (ONS) independent, while
taken out of an understandable wish to end political interference, had proved
to be "a mistake" because the ONS now sat in a "God-like
role" when it decided what did and did not score as public borrowing. He
said it had "hemmed in" the government and prevented it from
"doing all sorts of things" to boost industry.
He made a
wry dig at the Conservatives when, in reply to a question about whether James
Murdoch was a "fit and proper" person to run a media company, he said
that "unlike some of my colleagues I have never met him".
Cable had
responsibility to oversee News Corp's takeover of BSkyB but it was withdrawn in
2010, after he told undercover Telegraph reporters that he was going to war
with Murdoch, and since that time he has been very careful about his comments
in relation to media. But he did say that "cross-platform ownership has
got too great", and signalled he would be saying much more in his
scheduled appearance in front of the Leveson inquiry.
In his
wider remarks on the economy, Cable said that the British labour market was
"hyperefficient" and that he took issue with unnamed rightwingers,
who include several government figures, who believe the priority is making it
"easier to sack people". The "deep structural problems in the
British economy", he suggested, were instead to do with a "shortage
of specialised skills".
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