The man who could be chancellor plans radical changes for the City

Allister Heath
Allister Heath and David Crow pay a visit to Vince Cable ahead of the last week of the election campaign

FEW politicians have emerged from the financial crisis with their reputation intact. Vince Cable must be the only one who has actually enhanced his, with his brand of left-wing policies playing perfectly to the shifting zeitgeist. Always on hand to give journalists good, accessible quotes, the Liberal Democrat Treasury spokesman’s measured tones have been a hit with public. Until very recently, few in the media have scrutinised him, treating every one of his utterances as if they were gospel, rather than as the highly controversial, hard hitting policy proposals they really are. It is a status no other living British politician has achieved.

He also dodged a second bullet, the expenses scandal that spelled game over for scores of MPs. With no second home, Cable doesn’t claim the contentious additional cost allowance, while his expenses in 2007-08 ranked 568 out of a total of 645. Nor did he accept the 2.3 per cent salary rise that was recently offered to MPs. Little wonder that less scrupulous colleagues sardonically refer to him as “Saint Vince”.

When we interview Cable at his Twickenham home on a Sunday morning, it’s easy to see that he didn’t enter politics for its trappings. The 1930s semi is handsome but unimposing, furnished with worn rugs, African carvings and stylish but simple furniture. In the corner there is a small, ancient TV and DVD set. No car sits on the drive; Cable commutes to Westminster from the nearby overground station, and thinks all London MPs should do the same, instead of buying a taxpayer-funded bolthole in Zone 1.

Dressed in a Cancer Research fleece, navy trousers and leather slippers, Cable’s relaxed demeanour doesn’t suggest he is in the final week of a frenetic campaign. His wife, Rachel, unecessarily apologises for making us travel to south-west London in the pouring rain, making us cups of tea to take off the chill. After checking his emails (there’s an important one from press officer Kathrine), she sits in on the interview, listening intently, nodding approvingly.

Cable’s wise sage persona belies the fact that his programme for reform is wilfully radical and way to the left of his rivals. He wants to split up banks; publish the names of all bankers earning more than £200,000 (and mulls the idea of extending this much more widely across all industries); ban bank bonuses at board level; increase the top rate of capital gains tax to 50p; bring back a public interest test for takeovers; and launch a competition probe into Magic Circle firms and the “big four” accountancy giants. He claims that Kraft’s purchase of Cadbury was “clearly a damaging takeover.”

Normally none of this would matter, but with polls stubbornly pointing at a hung parliament, even Cable is willing to admit that it’s “possible” he will wind up as chancellor “in a week’s time”.

Despite these interventionist policies, Cable’s star remains high, even in the City (a recent poll for this newspaper found that 20 per cent of readers wanted him as chancellor, against 23 per cent for George Osborne and 26 per cent for Ken Clarke). “I do spend a vast amount of time talking to City A.M. readers,” he explains. “I tend to have very strong minority support in your polls, because most of them recognise that my analysis of the crisis was pretty sound.”

Cable also says the Lib Dems have proven they don’t share the centre-left’s reputation for profligacy. “The Guardian described me as ‘deficit hawk’ the other day,” he boasts. “We understand the importance of fiscal discipline. Nick Clegg and I were using the word ‘cuts’ last year, when the government wouldn’t even admit there was a problem.”

Some bankers even welcome the harsh line, Cable claims, because “a lot of them are genuinely embarrassed – in some cases ashamed” about what he sees as their role in the recession. “If you tell it like it is, if you say ‘you guys messed up very badly and there have got to be some reforms’, some will resent it while others will concede it’s a perfectly acceptable critique to make.”

He has no time for those who suggest that his policies could diminish London’s status as a global financial centre, as talented high-fliers flee or stay away. “Every time I go to a hedge fund dinner, I get this sort of blood-curdling stuff: ‘We’re all going to leave next week’. But there is not a shred of evidence to suggest that British financiers are net migrating to Switzerland.”

He admits that his plan to name and shame bankers earning over £200,000-a-year “causes some discomfort” but says the pursuit of transparency is more important. In a thinly-veiled criticism of Sir David Walker’s report into executive pay, which said public firms should publish the number – not names – of high earners, he says “Walker sort of nibbled at this and then backed off.” It seems that Cable is ready and willing to take a huge chomp.

If his plan for a British version of the now-defunct US Glass-Steagall act that forced the separation of investment and retail banking is adopted, he readily concedes that “the size of the banking sector will shrink as a share of GDP”. “I’m not trying to drive people away, but the fundamental problem is there is a contradiction between the British taxpayer being the guarantor of the banking system and banks acting as global banks apparently indifferent to the concerns of the UK economy. That problem is going to resolve itself presumably by some banks – both foreign and UK – reducing their activity here”.

Cable, a special adviser to Labour leader John Smith in the 1970s (when he was industry secretary), says he doesn’t want to return to the “picking winners strategy, having seen it in all its awfulness”. But he thinks a weaker pound, coupled with investment in education, infrastructure and science, could lead to a partial renaissance in manufacturing (though he is more realistic about this than the Tories).

When we interviewed George Osborne, the shadow chancellor last week, he said Cable’s plan for a new 50p top rate of capital gains tax (CGT) was “punitive” and “dangerous”. Cable, who is proposing the changes as part of plans to tax income and capital gains at the same rate, retorts: “Why doesn’t he ask Nigel Lawson. He often claims he’s the chancellor he most admired.” “I’m not sure why this is causing so many problems, because it’s actually going back to the Lawson approach in the late 1980s, in that you get massive arbitrage between income and CGT unless you equalise the rates. We’re getting quite a lot of large-scale avoidance.”

There’s no love lost between Cable and his Tory rival. “Osborne is a very smart politician,” he says. “But I’ve never really seen any interest in economic policy, which is a bit worrying when you’re talking about the shadow chancellor”. Having interviewed them both in recent weeks, it’s almost impossible to imagine them working together. But as Cable points out “with the way the polls are at the moment” they mightn’t have a choice.

Age: 66

Marital Status: Re-married; three children.

Education: Read natural science and economics at Cambridge University and completed a PhD at Glasgow University.

Career: 1970s: deputy director of the Overseas Development Institute, which included a period working for the then Secretary of State for Trade and Industry, John Smith MP, as a special adviser;1990: joined Shell International; 1995: became Shell's chief economist; 1997: MP for Twickenham; 1999: spokesman on trade and industry for Liberal Democrat shadow cabinet; 2003: Liberal Democrat shadow chancellor and is currently deputy leader of the Liberal Democrats.