Serious and deliberate, Sir Vince surveys the aftermath of The Storm

3 May
DSC_5436  Vince Cable Swindon festival of Literature

©Calyx Vince Cable at the Swindon Festival of Literature

There are two kinds of politicians: the quiet, steady-hand-on-the-rudder type, and the charismatic ones, who can seem appealing, but whose run-away mouths can often get them into trouble.

Serious and deliberate in his delivery, Vince Cable – who certainly falls into the former camp – nonetheless allows himself a joke at the expense of the latter.

“I see I am one of two speakers with a political background,” he tells the Swindon Festival of Literature tonight (Tuesday). “At least I don’t need to be looking around the audience to see where the Mossad people are.”

Ken Livingstone will be appearing next Tuesday.

But Sir Vince isn’t here to crack jokes (we’ll leave that job to Isy Suttie and Dom Joly on Thursday).

Instead, the former business secretary wants to talk about economics, and a couple of books he’s written on the subject.

Thankfully, we skip An Evaluation of the Multifibre Arrangement and Negotiating Options (bragging rights tip – if you read it and leave a review on Google Books you’ll be the first) and head straight to The Storm and its sequel, After the Storm.

The Storm, says Vince, was his own attempt to understand the causes of the economic crisis of 2007. “The last time the banks collapsed in the UK was in 1864. It was unprecedented,” he says.

“In order to understand it, I wrote a book about it. It probably wasn’t the best, but it was the first, and I got a lot of traction out of that.”

After the Storm looks at how Britain has fared, economically, since 2008. “On one hand we seem to have recovered,” he says, “but on the other hand there are still deep problems we have to deal with.”

These consequences he calls ‘legacies’.

The first legacy is debt. It was the level of debt that got us into trouble in the first place. “Back then we had four of the biggest banks in the world, and each had a balance sheet that was bigger than the UK economy,” he recalls. “When they crashed, the consequences were profound.”

But following the worst recession in living memory, it is debt that gives us the sense that things are getting better. Debt, he says, is now three times the size of the economy. And while we tend to concentrate on the ‘National Debt’ – the money owed by the government – the majority of the debt is household debt, primarily in the form of mortgages.

The second legacy is historically low interest rates. “It is remarkable,” he observes “that seven years on we are still there.”

Low interest rates have encouraged those with money to invest towards property ownership, which in turn has created a supply and demand bubble. In the post-war period, the ratio of house prices to household income was around three times. Now it’s 10.

Vince says we need to build more houses – the 400,000 a year of pre-recession years, rather than the 150,000 we are managing – and, through the council tax system, penalise owners sitting on empty properties.

The third legacy is the banking system. Vince is at pains to assure us that the banks are now “a lot safer” than they were, and hold more capital. One of the successes of the coalition, he says, was to split ‘casino’ and retail banks.

“However, banks are very creative institutions,” he warns. “We asked them to put plans in place to prevent them running to the taxpayer again if things go wrong. Seven years on there’s still no plan.”

He also warns of clouds on the horizon: the slowdown of China’s economy – the effects of which have already been seen here with the crisis at Tata Steel – and the ramifications of a possible Brexit from Europe.

On the referendum, he worries that older people – who are more likely to vote Out – will see us exit the Union, at the expense of younger people – who are more likely to want to Remain, but are far less likely to turn out on polling day.

He also worries about the “enormous gap” between generations: how those in their 50s, 60s, and 70s (he is 73 next week) enjoyed a free education, stable employment, access to the housing market, and decent pensions – all have which have been denied to younger citizens.

The man who worked shoulder-to-shoulder with George Osborne for five years is quick to praise Gordon Brown’s actions in the immediate aftermath of the crisis, while being critical that he “took his eye off the ball when the banks were out of control and the property market was overheating.”

Brown’s actions in bailing out the banks prevented the economic crisis becoming a catastrophe, he says.

And it’s clear he favours a more Keynsian approach to economic growth than the course preferred by the Conservatives, both during and after coalition, calling for investment in infrastructure, skills and innovation through government borrowing while interest rates are historically low.

He seems almost apologetic when he suggests that adding to the dreaded National Debt in favour of investment and job creation could be better for us in the long run. Perhaps that’s his own personal legacy of five years bunking-up with George Osborne.

Cable may be that steady-hand-on-the-rudder type, but the captain of the ship was plotting a different course entirely.

Sir Vince Cable at the Swindon Festival of Literature, at Swindon Arts Centre, 3 May 2016, written by Peter Davison.

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