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