Vince Cable, MP - UK Business Secretary HARDtalk

That is the summary of the news. Now it is time for HARDtalk.

Britain is experiencing the deepest, most sustained decline in living

standards for 50 years. The best the government can do is promised

the pain will be shared by all. Is that really the case? Where will

economic growth come from in this prolonged era of austerity? My

guess is Vince Cable, the Secretary of State for business and one of

the senior members of David Cameron's coalition cannot. The

economy will dominate politics for the next decade. Will it wreck the

Welcome to HARDtalk. Thank you. There has been much talk in the

last week of a lost decade. Is that a phrase that you accept is valid?

No. The word lost implies that nothing productive and useful will

happen. I do not accept that. It is hard. Living standards are being

squeezed. This is a consequence of this massive financial heart attack

that our country has suffered. But no, this is not going to be a lost

decade. The British economy will bounce -- balance. It will move to

a more sustainable kind of growth. In the previous decade we lived

under an allusion that growth was being created but it was being

created out of indebted banks that were not stable. Governments were

borrowing and we have now shifted away from that to an economy which

is more export focus. We are looking for business investment and

this is where growth will come from. Do you accept that this idea of

growth will not be relevant for average house cost? If you look at

the figures coming out of researchers, there will be a

serious decline for average house cost? I accept there will be a

squeeze on living standards. We are a poorer country as a result of the

financial collapse. You can argue about how much that is and what has

happened before but certainly much wealth has been wiped off. Would

you say that in all probability we are going to go back into

recession? No. That was not actually the forecast. forecast.ve

seen the forecast consistently wrong over the past three years.

You work in business and you are now the business secretary. You

have seen the surveys of manufacturing which are miserable

and business confidence falling. Do you believe we are falling back

into their recession? The working assumption we have, and that's all

we can do in the real world, in trying to engage in competitive

fo fo we have to have a basis option. We have the

independence and we suggest that there is a period of slow growth.

There are risks on both sides. You could have a recession but you

could have auld have a confidence. The assumption we are working on is

that a difficult period of growth is coming. The other day he said

the British government is making contingency plans for sinking back

into recession. What are those plans? I did not use that precise

words. They are dangerous things happening in the world at the

moment. There is the risk of the eurozone. As it is as you have to

think about the risks. Many things are happening that I would not want

to discuss publicly. We have to think about some of those risks.

Any government will have to think about tale risks, which are at the

end of the month. Everybody talks about the plan A, that George

Osborne is sticking too, when it comes to the front and centre

preoccupation with reducing the deficit. That might have to change

if the economic situation worsens? We are fully signed-up to what is

sometimes called Plan A, fiscal discipline. All the business groups

ideal with, they have different proposals, but you did say you are

Hall gaining a scenario. -- war gaming. But different people have

different ideas about how you stimulates growth. Fiscal growth is

fundamental. Throughout British politics there is an acceptance

there is no alternative to that. Clearly, we have to get growth.

What happened in the Autumn statement was a commitment to more

capital investment, shifting the emphasis about the election, the to

the I put forward proposals for a plan A-plus, getting growth through

infrastructure -- the CBI. continue the idea of contingency

for the moment. You will have seen that the credit rating agencies

Standard and Poor's has now announced that all of the eurozone,

except one country, is one now in a negative credit watch. There is a

50-50 chance they will reduce the trouble as a -- the trouble a

rating for France and Germany. I would be bad for the British

economy? That would be serious. We have been talking about this for

the last few weeks and it would affect us because top of our

exports go to the European you. It affects our banking sector because

the banks are independent -- the European Union. I am more

optimistic about the situation and so are many people in the UK. I

think we consistently underestimates, in Britain, the

willingness and capacity of the European countries to get their act

together in a time of crisis. The Germans have now accepted there is

a commitment to real fiscal discipline in the rest of the

eurozone, from the French and Italians and Greeks. On the basis

of that, I am confident we will now accept their needs to be more

liquidity and back-up from the European Central Bank. But with

respect, they have not so bad. But Nicholas Sarkozy and Angela Merkel

have said they are moving to a new architecture inside the eurozone.

Frankly, inside the European Union, because that is the knock-on

consequence. I wonder as you, as a senior Liberal Democrat, can see

this destabilising British politics. It would be stabilising if the

steps they are now sitting had the effect of defusing the crisis. I am

more optimistic than some people are but they are getting on top of

the spot on. This architecture, as far as Britain is concerned, the

key elements here that we need to preserve and improve is the working

of the single market. At the moment there is no threat but we have to

make sure that any provisions in how the European market works, the

single market is protected. there is a new fiscal union of

sorts, which involves more discipline and co-ordination within

the eurozone, Britain faces a series of choices. One it is if it

comes to a new treaty, a new EU treaty, does the British government

seek to negotiate, and this is where the Tories have best but, and

we will have some powers in Britain. What will the position of the

Liberal Democrats be? You are getting ahead of the dead. This is

an argument the Tories are already happening. It is hypothetical. The

immediate question is to stabilise the single market. If that is done

a lot of progress will happen. There is an argument about how the

eurozone will then legalise and formalise a fiscal union. This may

or may not affect the UK. It may not have treaty obligations, we do

not know. From the point of view of the UK, I want to see the European

Union succeed. From our national interest points of view, the key

issue is we maintain free trade with European countries. There is

no reason why that should not happen. What is your message about

the notion that Britain, very soon, could find itself on the assets

here, or the slow lane, of a two- tier, or a two-speed Europe -- on

the outer Tear. Do you believe, as is a pause of the European Union,

that that would be bad for Britain? -- as a supporter. We need to

maintain and strengthen the single market and we need to maintain good

relations with our European neighbours. It does not matter of

whether the European nations are proceeding at a faster pace. We do

not have plans to become part of it. Do you think it would, Britain's

interests? Yes, if we were marginalised from the decision-

making. We have to make sure we are not. We have to use tactful

diplomacy and have to make sure we are not marginalised. The fact is

we know Nicholas Sarkozy and Angela Merkel are talking about a more

rigorous and co-ordinated fiscal union within the eurozone where the

leaders are going to be expected to meet every month. If Britain is not

in such a system, how on earth can Britain carry much weight inside

the European Union in the future? There are 27 countries in the

European Union which have different levels of ambition about the degree

of integration which needs to take place. Within the 17 countries of

the eurozone, they need to get over this crisis to a closer union and

closer policy co-ordination. We are not trying to be part of that

grouping. We need to make absolutely clear that the wider

group, the Europe 27, is maintained as a decision-making body,

protecting the single market. That is our national interest.

German Foreign Minister said that one day, all of Europe will have

the single currency. He said it will happen sooner than the British

people think. Do you think he is right? As I said, I think we

underestimate the Europeans and the Germans making a success of the

eurozone. I think they will do. take his point that things are

moving so fast that while we in Britain may see no possibility of

being inside the eurozone a system, we actually might be in it sooner

than we think. You have been a long-time supporter of the euro. Do

you believe that Britain will end up inside the euro? Not within the

foreseeable future. I never used the word never. The Liberal

Democrats have always held out on the possibility of a subject for a

referendum. That is something Britain might contemplate. But that

is not in the foreseeable future, not in this current stage of our

people. You cannot ever say never. They are people in the Cabinet who

will say never. My final thought. The way the European debate is in

the margin on British politics. Do you think colleagues like yours say

they must be a referendum if there is any treaty change, you feel this

is going to destabilise this In the current circumstances, we

should have a referendum. Leads to an back to the British economic

situation. One word they your party used in the last election campaign,

in which both Nick Folk and David Cameron used all the time, fairness.

Deeply that what is happening now in terms of the way the economic

situation is being implemented is truly fair? Anders Breivik adding

the strategy is fair, but there is a lot of inequality around it.

study showed yesterday revealed that the gap in income is widening.

Britain is that the worst end of that particular spectrum. Clearly,

there is a problem that we have to deal with. There can be through

taxation and renumeration. Interesting that you say we have to

deal with it. Which is a debt the most recent mini-budget statement

from the Chancellor did not do it at all? They crushed the numbers

and said, I am quoting, poorer households will bear the brunt of

the latest austerity measures. Anders Breivik the latest number-

crunching did not take account of the number of benefits available.

They reckon 100,000 more children will fall into poverty because of

complex changes to tax credits and things like that. They have looked

at this very carefully, as have other groups, and they say it is

dire news for the poorest families. I would say it is because partly

some of the important steps that were taken were not factored into

those calculations. The Budget will look at the tax system as a halt

and I am my colleagues will be arguing a budget that we need to do

a lot more in terms of basic fairness. There is a collision

commitment to live to low earners out of it. We'll see how far we can

progress with that. We need to look at measures at the Top End as well.

I wonder when you signed up to the collision, whether you could have

imagined that you would be overseen a series of cuts which could make

700,000 public sector jobs disappear. We have seen a pay

freeze in the public sector for a couple of years. There is now going

to be a 1% cap on pay for another couple of years after that. Is this

the way you interpret fairness, just hitting the public sector so

hard? I believe your assessment, political image is right. I did

indigence similar circumstances to what we are facing now. 700,000 job

cuts? I describe the steps that would be to be taken. It did

involve cuts in public spending for the very simple reason that public

spending levels were built up on the back of revenue, much of it

from the financial services sector, which has now disappeared. how hike

in unemployment go and be tolerated by the country? Unemployment is

probably going to be at 3 million before too long. We had his

unemployment a verbal one million. How much higher are you prepared to

see it go? It is not a matter of the government encouraging

unemployment. Buyback if unemployment is so much higher than

ute anticipated, at some point you going to have to do something about

it. We are doing something about it. We have a commitment on youth

unemployment. The way in which we tried to expand the economy against

a background of very tough fiscal situations is monetary policy with

quantitive easing and other strategies. This is the way we

maintain demand and that is how employment levels are affected.

Getting back to the idea of fairness, you have talked a lot

about responsible capitalism. What we have seen in the last year is

the FTSE 100, the biggest companies in the UK, paying their directors

on average �2.7 million. We have seen the richest it ever richer. At

the moment, I do not see any specific measures to change that.

lot of the behaviour is unacceptable. One of the things the

Government did do was to maintain a very high marginal rate of tax on

top owners, a 50% rate. We also need to look not just that the

symptoms, but at the underlying causes and the way that pay is made.

Not just in the baking sector, but more generally. That is why I just

completed this consultation on renumeration and how it is made.

am hoping you might give me a single on how the review is going

to go. Your leader said we must call time on unjustified and

irresponsible behaviour of. The Association of British as roast

said basically the same thing. Anders Breivik they are absolutely

spot on. They are the owners of the companies that are making

irresponsible change. You're talking a sop up the hill that says

the election will be taken. What will happen? I have to be listened

to what people are telling me. I can see you what we are looking at.

There are important steps in terms of legislation. We are looking at

issues such as whether the boats of shareholders should be binding or

not. Employees on remuneration committees? That is one of the

things we are looking at. Is the Government prepared to legislate to

make that happen? I am not saying that. I want to digest what the

consultation is telling me about whether ideas like that are

feasible, how you implement them, what the legislation would have to

say. Superficially, it is an attractive idea. We are looking at

it carefully in a practical way. The dinner went to engage in

tokenism. I want to make a difference. I want to make it

responsible. In order for it to happen, we have to change the

mentality and involvement of the shareholders. I suppose what I come

back to is this idea that you have a certain set of positions, maybe

no shared by colleagues including the Prime Minister, how hard as you

prepare to fight on banking reform, for example? Yumi the clear that

you want to see immediate action on the break-up of the bank's image of

the arms are separated off from their retail operations. You could

for immediate action, but it has not happened. There is a process

that will be two very radical action on the banks. When it?

report has been completed. The Government is going to give an

official response on it imminently. We have made it clear there will be

legislation in the next session. The idea of ring-fencing is the

separation of the investment banking from retail sites. We are

committed to following through on the report. You have known what you

have wanted to see for a long time. One of your allies said that every

day goes by a widow action on the report puts the British economy at

more risk. There has to be more action. We have commissioned the

report to look at is extremely complex issue. Action is on the way.

It has to be legislated for. It cannot happen overnight. Did you

ever threaten to resign if George Osborne did not take specific

measures? I do not go around Reading to resign. You say that the

entire British economy is at stake because it is an important. At some

point you're going to have to make a stand. Are interesting arguments

rather than threatening to walk out. In this particular issue, I believe

argument has won. When will it be done? It will happen quickie,

within the parliament there will be legislation. Banks will change

because they know the legislation is coming into effect. They will

take action quickly. These are very complex issues. For example, each

of the three big banks in the UK has a balance sheet bigger than the

British economy. They are very big, complex organisms. Changing them

can have happen overnight -- cannot. the mayor of London has said if

these measures are taken, he says there is a whole raft of actions

that if they are followed through and maintained by the Government,

they will frighten off the biggest banks and the richest banks on the

city of London. Do you believe that? Know. Are you prepared for

many banks to leave London? Is not something I would like to encourage.

The report looked very carefully at the issue about whether banks would

migrate in response to the regulatory changes. The answer was