Vincent Cable interview - Always a step ahead of the rest

Published on Saturday 11 October 2008 18:40

BETWEEN becoming the most colourful Liberal Democrat for decades and many people's voice of reason on how to sort out the mess the big banks have got themselves into, Vincent Cable has found time to brush-up on his foxtrot and Viennese waltz.

"I've got a big dancing exam coming up. It's ballroom on this occasion and quite a high grade award. I have a coach who will be taking me through my pre-award lesson," he says. "I danced with my late wife and when she died I wanted something to do to cheer myself up a bit, so I started having lessons and I've being going ever since."

He is best known among the business community for criticising the Government and Bank of England for being slow to act to save Northern Rock and reduce the impact of the global credit crunch. But the general British public are more likely to recognise him as the dapper gent who twirled singer and Strictly Come Dancing star Alesha Dixon around the floor in BBC1's This Week programme.

Cable is a self-confessed addict of the prime-time dance show and it's his populist approach and willingness to say exactly what he means, no matter how controversial, that has helped him gain the respect of voters and given him a star billing in Parliament.

"I wasn't seeking the limelight, but the one thing I have been able to do is explain complicated economic and financial phenomena in fairly simple, straightforward terms," he says. "I do a job, that's the key thing. I don't have a neurotic need to be in the public eye."

However, it is not just Cable's willingness to speak out that has attracted attention, but his uncanny ability to be correct about the economy. He was one of the first politicians to warn that Gordon Brown's boom years could not continue indefinitely. Five years ago, in the heady days of spiralling house price inflation and cheap credit, Cable was urging caution to lenders and borrowers.

In November 2003, when interest rates stood at a 48-year low of 3.5%, Cable warned: "With interest rates set to start rising immediately, the ticking debt time-bomb is set to explode. Many people who have borrowed to the limit are going to regret pushing their debts up so high."

His warning has come to fruition as bankruptcies and repossessions soar. Homeowners who took out cheap five-year fixed-rate mortgage deals in 2003 are now being forced to switch to deals that could double their repayments.

Then last August, when the majority of commentators still viewed the sub-prime debacle as a problem for the US rather than the source of the global credit crunch, Cable was regarded as a doom-monger when he warned that "the British must not be smug about what has happened in the US. There is the potential for it to happen here because the banks have been lending far too easily. People are borrowing five or six times their income, which is well beyond most people's means."

Only a few weeks later he was proved correct once again when the Bank of England was forced to bail out Northern Rock with an emergency loan. However, the response was criticised as "too little, too late", a trait which Cable says has come to characterise the Government.

Last week, with the markets experiencing further turmoil, he was once again touring the television studios and popping up in Parliament to support the Government's bailout plan but to remind those listening that it could have acted more quickly.

"The Government was very slow to understand the importance of the Northern Rock issue and the fact that it could only be resolved through direct intervention leading to public ownership," he says.

While he concedes that the Government is caught up in a global crisis, he believes it must take some of the blame for the "specifically British problem" of personal debt and the housing market bubble. "But they did get to the right place eventually," he says. "I think what they've been doing over the past few weeks, including the package on Wednesday, is broadly sensible and the Lib Dems have supported it."

Given Cable's experience and maturity – he is 65 – it's not surprising that he is confident he could have handled the crisis better. He says wryly: "I hesitate to be immodest, but I think we could do a better job."

Cable certainly has the CV to back up this claim, both politically and in business. On leaving grammar school in Yorkshire, he read natural science and economics at Cambridge. He then moved to Scotland to complete a PhD in economics at Glasgow University.

After working as treasury finance officer for the Kenyan government between 1966 and 1968, he returned to Scotland and served as a Labour councillor in Glasgow from 1971 until 1974.

Cable's involvement with Labour will not have gone down well with his father, a Tory academic. But in recent months he has shown he sticks by his principles and opinions, even if they upset those around him.

When the Social Democrat Party was formed he switched his allegiances from Labour and after unsuccessfully contesting York he moved to Twickenham in south-west London. He was elected to Parliament to represent the constituency in 1997.

While not on the campaign trail, he was carving out a successful career in big business. He joined Shell International in 1990 and became its chief economist in 1995.

His varied background is in contrast to most of his peers. "There are very few people in the upper reaches of Government who have experience of big business. This is even more true of the Tories," he says. "David Cameron and George Osborne have absolutely no experience whatsoever of the real world and that shows."

He would be "very worried" about the UK economy if the Tories come to power, he says. "They're just jumping from one position to another and they've been consistently wrong in all the big economic issues that have come through in the last year."

Rather than crowing about his accurate predictions, Cable insists: "It was actually quite difficult being right. There's always pressure to follow the orthodox conventional wisdom. We took some risks. Even last weekend my colleagues and I were arguing for the recapitalisation of the banks and for a big cut in interest rates. We were attacked for doing so, but we turned out to be right."

While some commentators may say it's easy for the Lib Dems to tell their rivals how things should be handled because they will never be in power, Cable, who is also the party's deputy leader, believes the recent economic and political upheavals have increased their chances of breaking through at a UK level. "In terms of our political future, I'm very optimistic," he says.

Cable never forgets that his priority is representing his Twickenham constituents, and his long-running crusade against personal debt comes from his daily encounters with them.

"A lot of my constituents are running into financial trouble and housing is a big issue because young couples have been completely priced out of the market," he says.

To tackle the problem, the Lib Dems have come up with a series of policies. These include trying to stop wide-scale repossessions and encouraging councils and social landlords across the UK to buy up land to build affordable housing.

However, Cable is not about to become a wild optimist just because the UK Government has finally taken appropriate action and bailed out the banks. Although he is keen not to single out the Royal Bank of Scotland's Sir Fred Goodwin for criticism, he wants chief executives of the banks that have been rescued to do some explaining. He is also warning against the current obsession of tracking world stock markets to get a view on the economy and insists that the London inter-bank lending rate (Libor) is the statistic that matters.

"The key issue is that Libor has been alarmingly high and that's why borrowing is so expensive. Stock markets are largely irrelevant," he warns. "There has been a breakdown in trust between the banks and they don't want to lend to each other. If they don't trust each other, customers won't trust them and won't put their deposits with them. That's the problem and that's why we have to look at Libor."

The issue is likely to bother him until it is resolved and he'll be returning to it to press his point. That's when he's not putting the final touches to his latest dance routine.