On Sunday 15 February Andrew Marr interviewed Vince Cable MP Please note 'The Andrew Marr Show' must be credited if any part of this transcript is used. Lib Dem Treasury spokesman, Vince Cable has a stern message for banks dependent on taxpayers' money. ANDREW MARR:  Vince Cable MP |
Parliament's been turning up the heat on the bankers. MPs seem to enjoy that - it's not very often that MPs get the chance to grill people more vilified than they are. But, remember, not so long ago politicians were courting financiers whose industry generated vast amounts of dosh. In a newspaper column today, the Lib-Dem Treasury Spokesman, Vince Cable, warns that both sides are going to feel the public's wrath. He joins me now. Welcome. The nasty feeling that every time you smile, another bank goes. (laughs) VINCE CABLE: I hope not. ANDREW MARR: You're making a very serious point in this article, which is, I suppose, who really does understand the banking system except for bankers - many of whom are tainted by past decisions they've been taking. And so although you say there's the sort of establishment of politicians, on the one hand, and bankers on the other, and they're all in each other's pockets - and up to a point that's clearly true - what other options are there? Who else understands the system? VINCE CABLE: Well the Government is making the assumption you are that there's an extremely limited talent pool that they can draw on, and we had this position that was exposed during the week. It was actually more important, I think, than the Crosby affair, which was Mr Moreno, which is this body that oversees the banking system - an enormously important body - and as far as I could establish, all the people on it were either fund managers or investment bankers. Now� ANDREW MARR: So, sorry, no people from manufacturing� VINCE CABLE: Yes, exactly. ANDREW MARR: �no people representing the consumer. VINCE CABLE: And nobody who'd ever experienced a recession and seen the real world. And it was just terribly unbalanced. And I think if we're talking about the future of the economy and the future of regulation and oversight, then clearly you need a better mix. And even within the financial community, I mean there are people who've come out of this well. You know the traditional building societies did not get into this excessive behaviour because that was the way they were structured, and they're not being used. ANDREW MARR: You talk about traditional building societies and banks. Do you think that one of the things we'll see out of all of this is a return to the old split between ordinary banks lending money to people like us and to small businesses and so on and knowing their customers, on the one hand, and the sort of clever, allegedly clever global investment people on the other? VINCE CABLE: Yes, I think in terms of broad architecture, that is the right approach. But that's a very simple definition and the point's often made by people in the City, the investment banks had very high risk and very low risk activities and it's actually risk which is the issue. But I think the basic structure that has to come out of this is that we have safe banks, people deposit their money, and we have lending to small, medium-sized businesses, personal borrowing, which effectively operate like utilities, which are safe, properly regulated and do not get into excessive behaviour. And if people want to gamble with their own or other people's money, well you know there is a role for that in the financial system, but they cannot expect then to be bailed out by the taxpayer. ANDREW MARR: Turning to the immediate crisis, which I suppose is centred on Lloyds/HBOS, do you think it's now inevitable that this bank is going to be nationalised? VINCE CABLE: Well it's not inevitable, but we're drifting in that direction. I mean what's worrying about it is that we're, we're getting into nationalisation accidentally - you know by stealth maybe, but certainly accidentally. The Group may well have to come back for more capital from the Government, more shareholding, which will take it over the 50% threshold. So we'll have the biggest bank in the world, in balance sheet terms - the Royal Bank of Scotland, already de facto nationalised - and then this similarly. And my frustration is that you know we have these banks that are almost nationalised, but are not being run in the public interest, and I think the Government's just got to be much more decisive and it's got to say to these banks yes, you are now in effect nationalised banks. We want you, therefore, to serve the interests of the national economy, in terms of additional lending. We've got to separate out the good loans and the bad loans. We've got to attack things like the bonus culture� ANDREW MARR: (over) And could they put a cap on, a cap on� VINCE CABLE: �and eventually, eventually they will be sold off into the market. I'm not arguing for permanent nationalisation. Let's just deal with reality. Temporary nationalisation's going to be a part of the solution. ANDREW MARR: Right at the beginning of the show, I was talking about the vast overhang of public debt, the hole in the public finances that we now face. As somebody who you never know what happens in election, you may well be in the Treasury yourself under some coalition arrangement or whatever - do you have to go back and look at all your previous plans on taxing and spending and totally recast them? VINCE CABLE: Well whoever's in government is not going to have an easy time and there's no scope for easy public spending commitment, so that's absolutely clear. I think the figures that emerged this morning partly reflect the recession. I mean if you have a recession, you're bound to get a bigger deficit because there's less tax revenue and there's more spending on people who are unemployed, but even coming out of the recession, it's very clear that there's a very big structural deficit. You know we can argue about how big it is, but any government's going to have to deal with that. And what it means in practice is that public spending is going to have to be severely disciplined and that's why we� ANDREW MARR: (over) Doesn't that mean that you can't actually deliver on the tax cuts that you were talking about actually really only a few weeks or months ago? VINCE CABLE: No, I don't accept that. I mean what the Liberal Democrats have been arguing in tax terms is that there should be a tax cut for people at the bottom end of the income scale, people on low pay, and it should be fully funded - in other words people at the top end, people who get all kinds of tax breaks should pay for it. So we're not arguing for tax cuts� ANDREW MARR: (over) As well as all the tax rises that are going to have to come to pay for this. VINCE CABLE: I think actually the emphasis will not be on increasing the general level of taxation. It will be on tight discipline over public spending, and that's why the debate's moving on to big issues like public sector pensions, for example. ANDREW MARR: Public sector pensions and the size of the state. VINCE CABLE: Yes, absolutely. And there are many things that the Government is doing that it shouldn't be doing and what I and Nick Clegg, the Liberal Democrats are doing at the moment is trying to identify areas of public spending that the Government should not be doing because we can't afford it. ANDREW MARR: And so looking ahead, the Liberal Democrats will be one of those parties saying we have to shrink the size of the state? VINCE CABLE: Yes, that there are things the Government are currently doing and shouldn't be doing. ANDREW MARR: That's interesting. VINCE CABLE: We fully accept that. ANDREW MARR: That's interesting. A lot of anger again in the papers today about the bonus culture, particularly focused on Lloyds/HBOS and the alleged �120 million going on bonuses there. Do you think those bonuses should not be paid? VINCE CABLE: No, they should not be paid and we should be very clear about that. I mean there are kind of contractual problems that have to be overcome, but as a general policy position no bonuses should be paid to banks that have failed and are dependent on the taxpayer. We should be quite clear about that. There's a longer term question about how you have a bonus system and how you do create incentives and prevent people taking cash that creates excessive risk, but those big long-term reforms have to be kept separate from today's problems, which are not using taxpayers' money to pay out very large bonuses, for the most part to very highly paid people who have failed as business people. ANDREW MARR: We've seen the bankers blamed obviously for the extraordinary mistakes and errors of judgement they've made; we've seen the Government blamed for failing to oversee the situation, failing to spot the problems. What about the Bank of England and the FSA? VINCE CABLE: Well, as you say, there's no single source of blame and you know I think Lord Turner's on shortly and he will talk about the FSA, but clearly there have been failures there. The most obvious and publicised one was Northern Rock. I'm sure there have been others. But I think one of the things going forward, we do need not more regulation - it's not more bureaucrats ticking boxes, that isn't the issue. It's about having more effective supervision of the banks that have taken place, and I'm sure the regulators themselves would say that in the United States, which has a much tougher system of regulation, many of these abuses occurred there too. So thinking this through and getting that right is going to be not easy. ANDREW MARR: If we need a new structure, a new system, what will it look like? VINCE CABLE: Well it's one that we discussed a few moments ago where the institutions responsible for banking will be fairly tightly regulated, tightly managed to make sure that people can deposit their money with absolute and complete security, that small business, medium-sized business can draw on capital from banks which are traditional type of banks. But there will be� You know we live in a world of international finance. There will be - hedge funds and so on, they've got to have proper capital requirements - but there will be greater freedom� ANDREW MARR: (over) I am going to talk to Adair Turner in just a moment, and of course he's new, relatively new in the job, but the FSA has not done what it was set up to do, has it? VINCE CABLE: Well there have been failures, that's for sure, and I think one of the lessons coming out of this, which they themselves have acknowledged, they're going to need high quality people. I mean one of the embarrassing features of the City is you have people in the big investment banks paid an absolute fortune and people, public servants in effect looking over the banks in a much weaker position. And I think now that we have a very deep financial recession, you're going to find a lot of heavily qualified bankers queuing up for jobs as regulators and that will make the balance between the poachers and the gamekeepers a little bit more even. ANDREW MARR: It's going to flip a bit. Alright, for now, thank you very much indeed, Vince Cable. INTERVIEW ENDS
Please note "The Andrew Marr Show" must be credited if any part of this transcript is used.
NB: This transcript was typed from a recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy
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