:00:10. > :00:15.That is the summary of the news. Now it is time for HARDtalk.
:00:15. > :00:18.Britain is experiencing the deepest, most sustained decline in living
:00:18. > :00:24.standards for 50 years. The best the government can do is promised
:00:24. > :00:29.the pain will be shared by all. Is that really the case? Where will
:00:29. > :00:34.economic growth come from in this prolonged era of austerity? My
:00:34. > :00:42.guess is Vince Cable, the Secretary of State for business and one of
:00:42. > :00:48.the senior members of David Cameron's coalition cannot. The
:00:48. > :00:58.economy will dominate politics for the next decade. Will it wreck the
:00:58. > :01:05.
:01:05. > :01:12.Welcome to HARDtalk. Thank you. There has been much talk in the
:01:12. > :01:18.last week of a lost decade. Is that a phrase that you accept is valid?
:01:18. > :01:24.No. The word lost implies that nothing productive and useful will
:01:24. > :01:29.happen. I do not accept that. It is hard. Living standards are being
:01:29. > :01:36.squeezed. This is a consequence of this massive financial heart attack
:01:36. > :01:42.that our country has suffered. But no, this is not going to be a lost
:01:42. > :01:49.decade. The British economy will bounce -- balance. It will move to
:01:49. > :01:54.a more sustainable kind of growth. In the previous decade we lived
:01:54. > :01:59.under an allusion that growth was being created but it was being
:01:59. > :02:04.created out of indebted banks that were not stable. Governments were
:02:04. > :02:07.borrowing and we have now shifted away from that to an economy which
:02:07. > :02:13.is more export focus. We are looking for business investment and
:02:13. > :02:16.this is where growth will come from. Do you accept that this idea of
:02:16. > :02:24.growth will not be relevant for average house cost? If you look at
:02:24. > :02:30.the figures coming out of researchers, there will be a
:02:30. > :02:36.serious decline for average house cost? I accept there will be a
:02:36. > :02:40.squeeze on living standards. We are a poorer country as a result of the
:02:40. > :02:49.financial collapse. You can argue about how much that is and what has
:02:49. > :02:52.happened before but certainly much wealth has been wiped off. Would
:02:52. > :02:59.you say that in all probability we are going to go back into
:02:59. > :03:03.recession? No. That was not actually the forecast. forecast.ve
:03:03. > :03:07.seen the forecast consistently wrong over the past three years.
:03:07. > :03:11.You work in business and you are now the business secretary. You
:03:11. > :03:14.have seen the surveys of manufacturing which are miserable
:03:14. > :03:18.and business confidence falling. Do you believe we are falling back
:03:18. > :03:25.into their recession? The working assumption we have, and that's all
:03:25. > :03:31.we can do in the real world, in trying to engage in competitive
:03:31. > :03:36.fo fo we have to have a basis option. We have the
:03:36. > :03:40.independence and we suggest that there is a period of slow growth.
:03:41. > :03:45.There are risks on both sides. You could have a recession but you
:03:45. > :03:49.could have auld have a confidence. The assumption we are working on is
:03:49. > :03:52.that a difficult period of growth is coming. The other day he said
:03:52. > :03:57.the British government is making contingency plans for sinking back
:03:57. > :04:01.into recession. What are those plans? I did not use that precise
:04:01. > :04:06.words. They are dangerous things happening in the world at the
:04:06. > :04:10.moment. There is the risk of the eurozone. As it is as you have to
:04:10. > :04:16.think about the risks. Many things are happening that I would not want
:04:16. > :04:21.to discuss publicly. We have to think about some of those risks.
:04:21. > :04:25.Any government will have to think about tale risks, which are at the
:04:25. > :04:30.end of the month. Everybody talks about the plan A, that George
:04:30. > :04:34.Osborne is sticking too, when it comes to the front and centre
:04:34. > :04:40.preoccupation with reducing the deficit. That might have to change
:04:41. > :04:45.if the economic situation worsens? We are fully signed-up to what is
:04:45. > :04:51.sometimes called Plan A, fiscal discipline. All the business groups
:04:51. > :05:01.ideal with, they have different proposals, but you did say you are
:05:01. > :05:05.Hall gaining a scenario. -- war gaming. But different people have
:05:05. > :05:10.different ideas about how you stimulates growth. Fiscal growth is
:05:10. > :05:15.fundamental. Throughout British politics there is an acceptance
:05:15. > :05:19.there is no alternative to that. Clearly, we have to get growth.
:05:19. > :05:25.What happened in the Autumn statement was a commitment to more
:05:25. > :05:31.capital investment, shifting the emphasis about the election, the to
:05:31. > :05:35.the I put forward proposals for a plan A-plus, getting growth through
:05:35. > :05:41.infrastructure -- the CBI. continue the idea of contingency
:05:41. > :05:46.for the moment. You will have seen that the credit rating agencies
:05:47. > :05:54.Standard and Poor's has now announced that all of the eurozone,
:05:54. > :06:03.except one country, is one now in a negative credit watch. There is a
:06:03. > :06:06.50-50 chance they will reduce the trouble as a -- the trouble a
:06:06. > :06:10.rating for France and Germany. I would be bad for the British
:06:10. > :06:13.economy? That would be serious. We have been talking about this for
:06:13. > :06:18.the last few weeks and it would affect us because top of our
:06:18. > :06:22.exports go to the European you. It affects our banking sector because
:06:22. > :06:32.the banks are independent -- the European Union. I am more
:06:32. > :06:33.
:06:33. > :06:37.optimistic about the situation and so are many people in the UK. I
:06:38. > :06:41.think we consistently underestimates, in Britain, the
:06:41. > :06:49.willingness and capacity of the European countries to get their act
:06:49. > :06:51.together in a time of crisis. The Germans have now accepted there is
:06:51. > :06:55.a commitment to real fiscal discipline in the rest of the
:06:55. > :07:01.eurozone, from the French and Italians and Greeks. On the basis
:07:02. > :07:05.of that, I am confident we will now accept their needs to be more
:07:05. > :07:11.liquidity and back-up from the European Central Bank. But with
:07:11. > :07:16.respect, they have not so bad. But Nicholas Sarkozy and Angela Merkel
:07:16. > :07:19.have said they are moving to a new architecture inside the eurozone.
:07:19. > :07:26.Frankly, inside the European Union, because that is the knock-on
:07:26. > :07:36.consequence. I wonder as you, as a senior Liberal Democrat, can see
:07:36. > :07:37.
:07:37. > :07:41.this destabilising British politics. It would be stabilising if the
:07:41. > :07:46.steps they are now sitting had the effect of defusing the crisis. I am
:07:46. > :07:51.more optimistic than some people are but they are getting on top of
:07:51. > :07:56.the spot on. This architecture, as far as Britain is concerned, the
:07:56. > :08:03.key elements here that we need to preserve and improve is the working
:08:03. > :08:09.of the single market. At the moment there is no threat but we have to
:08:09. > :08:14.make sure that any provisions in how the European market works, the
:08:14. > :08:19.single market is protected. there is a new fiscal union of
:08:19. > :08:23.sorts, which involves more discipline and co-ordination within
:08:23. > :08:27.the eurozone, Britain faces a series of choices. One it is if it
:08:27. > :08:36.comes to a new treaty, a new EU treaty, does the British government
:08:36. > :08:40.seek to negotiate, and this is where the Tories have best but, and
:08:40. > :08:45.we will have some powers in Britain. What will the position of the
:08:45. > :08:52.Liberal Democrats be? You are getting ahead of the dead. This is
:08:52. > :08:56.an argument the Tories are already happening. It is hypothetical. The
:08:56. > :09:01.immediate question is to stabilise the single market. If that is done
:09:01. > :09:07.a lot of progress will happen. There is an argument about how the
:09:07. > :09:12.eurozone will then legalise and formalise a fiscal union. This may
:09:12. > :09:19.or may not affect the UK. It may not have treaty obligations, we do
:09:19. > :09:24.not know. From the point of view of the UK, I want to see the European
:09:24. > :09:28.Union succeed. From our national interest points of view, the key
:09:28. > :09:36.issue is we maintain free trade with European countries. There is
:09:36. > :09:42.no reason why that should not happen. What is your message about
:09:42. > :09:49.the notion that Britain, very soon, could find itself on the assets
:09:49. > :09:53.here, or the slow lane, of a two- tier, or a two-speed Europe -- on
:09:53. > :09:58.the outer Tear. Do you believe, as is a pause of the European Union,
:09:58. > :10:03.that that would be bad for Britain? -- as a supporter. We need to
:10:03. > :10:07.maintain and strengthen the single market and we need to maintain good
:10:07. > :10:13.relations with our European neighbours. It does not matter of
:10:13. > :10:18.whether the European nations are proceeding at a faster pace. We do
:10:18. > :10:23.not have plans to become part of it. Do you think it would, Britain's
:10:23. > :10:29.interests? Yes, if we were marginalised from the decision-
:10:29. > :10:34.making. We have to make sure we are not. We have to use tactful
:10:34. > :10:38.diplomacy and have to make sure we are not marginalised. The fact is
:10:38. > :10:43.we know Nicholas Sarkozy and Angela Merkel are talking about a more
:10:43. > :10:48.rigorous and co-ordinated fiscal union within the eurozone where the
:10:48. > :10:54.leaders are going to be expected to meet every month. If Britain is not
:10:54. > :10:59.in such a system, how on earth can Britain carry much weight inside
:10:59. > :11:02.the European Union in the future? There are 27 countries in the
:11:02. > :11:07.European Union which have different levels of ambition about the degree
:11:07. > :11:14.of integration which needs to take place. Within the 17 countries of
:11:14. > :11:19.the eurozone, they need to get over this crisis to a closer union and
:11:19. > :11:23.closer policy co-ordination. We are not trying to be part of that
:11:23. > :11:29.grouping. We need to make absolutely clear that the wider
:11:29. > :11:34.group, the Europe 27, is maintained as a decision-making body,
:11:34. > :11:37.protecting the single market. That is our national interest.
:11:38. > :11:43.German Foreign Minister said that one day, all of Europe will have
:11:43. > :11:53.the single currency. He said it will happen sooner than the British
:11:53. > :11:56.people think. Do you think he is right? As I said, I think we
:11:56. > :12:01.underestimate the Europeans and the Germans making a success of the
:12:01. > :12:07.eurozone. I think they will do. take his point that things are
:12:07. > :12:11.moving so fast that while we in Britain may see no possibility of
:12:12. > :12:16.being inside the eurozone a system, we actually might be in it sooner
:12:16. > :12:21.than we think. You have been a long-time supporter of the euro. Do
:12:21. > :12:26.you believe that Britain will end up inside the euro? Not within the
:12:26. > :12:30.foreseeable future. I never used the word never. The Liberal
:12:30. > :12:34.Democrats have always held out on the possibility of a subject for a
:12:34. > :12:39.referendum. That is something Britain might contemplate. But that
:12:39. > :12:46.is not in the foreseeable future, not in this current stage of our
:12:46. > :12:51.people. You cannot ever say never. They are people in the Cabinet who
:12:52. > :12:56.will say never. My final thought. The way the European debate is in
:12:56. > :13:00.the margin on British politics. Do you think colleagues like yours say
:13:00. > :13:10.they must be a referendum if there is any treaty change, you feel this
:13:10. > :13:11.
:13:11. > :13:17.is going to destabilise this In the current circumstances, we
:13:17. > :13:22.should have a referendum. Leads to an back to the British economic
:13:22. > :13:30.situation. One word they your party used in the last election campaign,
:13:30. > :13:34.in which both Nick Folk and David Cameron used all the time, fairness.
:13:34. > :13:38.Deeply that what is happening now in terms of the way the economic
:13:38. > :13:47.situation is being implemented is truly fair? Anders Breivik adding
:13:47. > :13:54.the strategy is fair, but there is a lot of inequality around it.
:13:54. > :13:56.study showed yesterday revealed that the gap in income is widening.
:13:56. > :14:03.Britain is that the worst end of that particular spectrum. Clearly,
:14:03. > :14:07.there is a problem that we have to deal with. There can be through
:14:07. > :14:11.taxation and renumeration. Interesting that you say we have to
:14:11. > :14:17.deal with it. Which is a debt the most recent mini-budget statement
:14:17. > :14:21.from the Chancellor did not do it at all? They crushed the numbers
:14:21. > :14:26.and said, I am quoting, poorer households will bear the brunt of
:14:26. > :14:36.the latest austerity measures. Anders Breivik the latest number-
:14:36. > :14:40.crunching did not take account of the number of benefits available.
:14:40. > :14:45.They reckon 100,000 more children will fall into poverty because of
:14:45. > :14:51.complex changes to tax credits and things like that. They have looked
:14:51. > :14:59.at this very carefully, as have other groups, and they say it is
:14:59. > :15:03.dire news for the poorest families. I would say it is because partly
:15:03. > :15:08.some of the important steps that were taken were not factored into
:15:08. > :15:11.those calculations. The Budget will look at the tax system as a halt
:15:11. > :15:17.and I am my colleagues will be arguing a budget that we need to do
:15:17. > :15:21.a lot more in terms of basic fairness. There is a collision
:15:21. > :15:25.commitment to live to low earners out of it. We'll see how far we can
:15:25. > :15:34.progress with that. We need to look at measures at the Top End as well.
:15:34. > :15:41.I wonder when you signed up to the collision, whether you could have
:15:41. > :15:46.imagined that you would be overseen a series of cuts which could make
:15:46. > :15:50.700,000 public sector jobs disappear. We have seen a pay
:15:50. > :15:55.freeze in the public sector for a couple of years. There is now going
:15:55. > :15:59.to be a 1% cap on pay for another couple of years after that. Is this
:15:59. > :16:08.the way you interpret fairness, just hitting the public sector so
:16:08. > :16:14.hard? I believe your assessment, political image is right. I did
:16:14. > :16:23.indigence similar circumstances to what we are facing now. 700,000 job
:16:23. > :16:27.cuts? I describe the steps that would be to be taken. It did
:16:27. > :16:31.involve cuts in public spending for the very simple reason that public
:16:31. > :16:41.spending levels were built up on the back of revenue, much of it
:16:41. > :16:46.from the financial services sector, which has now disappeared. how hike
:16:46. > :16:51.in unemployment go and be tolerated by the country? Unemployment is
:16:51. > :16:55.probably going to be at 3 million before too long. We had his
:16:55. > :17:02.unemployment a verbal one million. How much higher are you prepared to
:17:02. > :17:06.see it go? It is not a matter of the government encouraging
:17:06. > :17:10.unemployment. Buyback if unemployment is so much higher than
:17:10. > :17:16.ute anticipated, at some point you going to have to do something about
:17:16. > :17:20.it. We are doing something about it. We have a commitment on youth
:17:20. > :17:30.unemployment. The way in which we tried to expand the economy against
:17:30. > :17:34.a background of very tough fiscal situations is monetary policy with
:17:34. > :17:40.quantitive easing and other strategies. This is the way we
:17:40. > :17:44.maintain demand and that is how employment levels are affected.
:17:44. > :17:50.Getting back to the idea of fairness, you have talked a lot
:17:50. > :17:55.about responsible capitalism. What we have seen in the last year is
:17:55. > :18:01.the FTSE 100, the biggest companies in the UK, paying their directors
:18:01. > :18:09.on average �2.7 million. We have seen the richest it ever richer. At
:18:09. > :18:12.the moment, I do not see any specific measures to change that.
:18:12. > :18:16.lot of the behaviour is unacceptable. One of the things the
:18:16. > :18:23.Government did do was to maintain a very high marginal rate of tax on
:18:23. > :18:27.top owners, a 50% rate. We also need to look not just that the
:18:28. > :18:34.symptoms, but at the underlying causes and the way that pay is made.
:18:34. > :18:38.Not just in the baking sector, but more generally. That is why I just
:18:38. > :18:42.completed this consultation on renumeration and how it is made.
:18:42. > :18:46.am hoping you might give me a single on how the review is going
:18:46. > :18:52.to go. Your leader said we must call time on unjustified and
:18:52. > :18:55.irresponsible behaviour of. The Association of British as roast
:18:55. > :19:00.said basically the same thing. Anders Breivik they are absolutely
:19:00. > :19:09.spot on. They are the owners of the companies that are making
:19:09. > :19:16.irresponsible change. You're talking a sop up the hill that says
:19:16. > :19:21.the election will be taken. What will happen? I have to be listened
:19:21. > :19:24.to what people are telling me. I can see you what we are looking at.
:19:24. > :19:29.There are important steps in terms of legislation. We are looking at
:19:29. > :19:38.issues such as whether the boats of shareholders should be binding or
:19:38. > :19:42.not. Employees on remuneration committees? That is one of the
:19:42. > :19:49.things we are looking at. Is the Government prepared to legislate to
:19:49. > :19:53.make that happen? I am not saying that. I want to digest what the
:19:53. > :19:56.consultation is telling me about whether ideas like that are
:19:56. > :20:04.feasible, how you implement them, what the legislation would have to
:20:04. > :20:08.say. Superficially, it is an attractive idea. We are looking at
:20:08. > :20:14.it carefully in a practical way. The dinner went to engage in
:20:14. > :20:18.tokenism. I want to make a difference. I want to make it
:20:18. > :20:24.responsible. In order for it to happen, we have to change the
:20:24. > :20:29.mentality and involvement of the shareholders. I suppose what I come
:20:29. > :20:34.back to is this idea that you have a certain set of positions, maybe
:20:34. > :20:41.no shared by colleagues including the Prime Minister, how hard as you
:20:41. > :20:49.prepare to fight on banking reform, for example? Yumi the clear that
:20:49. > :20:53.you want to see immediate action on the break-up of the bank's image of
:20:53. > :20:59.the arms are separated off from their retail operations. You could
:20:59. > :21:05.for immediate action, but it has not happened. There is a process
:21:05. > :21:09.that will be two very radical action on the banks. When it?
:21:09. > :21:14.report has been completed. The Government is going to give an
:21:14. > :21:24.official response on it imminently. We have made it clear there will be
:21:24. > :21:24.
:21:24. > :21:28.legislation in the next session. The idea of ring-fencing is the
:21:28. > :21:32.separation of the investment banking from retail sites. We are
:21:32. > :21:37.committed to following through on the report. You have known what you
:21:37. > :21:41.have wanted to see for a long time. One of your allies said that every
:21:41. > :21:49.day goes by a widow action on the report puts the British economy at
:21:49. > :21:55.more risk. There has to be more action. We have commissioned the
:21:55. > :22:02.report to look at is extremely complex issue. Action is on the way.
:22:02. > :22:06.It has to be legislated for. It cannot happen overnight. Did you
:22:06. > :22:13.ever threaten to resign if George Osborne did not take specific
:22:13. > :22:17.measures? I do not go around Reading to resign. You say that the
:22:17. > :22:22.entire British economy is at stake because it is an important. At some
:22:22. > :22:31.point you're going to have to make a stand. Are interesting arguments
:22:31. > :22:37.rather than threatening to walk out. In this particular issue, I believe
:22:37. > :22:42.argument has won. When will it be done? It will happen quickie,
:22:42. > :22:46.within the parliament there will be legislation. Banks will change
:22:46. > :22:53.because they know the legislation is coming into effect. They will
:22:54. > :22:57.take action quickly. These are very complex issues. For example, each
:22:57. > :23:03.of the three big banks in the UK has a balance sheet bigger than the
:23:03. > :23:12.British economy. They are very big, complex organisms. Changing them
:23:12. > :23:19.can have happen overnight -- cannot. the mayor of London has said if
:23:19. > :23:22.these measures are taken, he says there is a whole raft of actions
:23:22. > :23:28.that if they are followed through and maintained by the Government,
:23:28. > :23:33.they will frighten off the biggest banks and the richest banks on the
:23:33. > :23:41.city of London. Do you believe that? Know. Are you prepared for
:23:41. > :23:45.many banks to leave London? Is not something I would like to encourage.
:23:45. > :23:49.The report looked very carefully at the issue about whether banks would
:23:49. > :23:53.migrate in response to the regulatory changes. The answer was