Any quotes used must be attributed to Murnaghan, Sky News 

DERMOT MURNAGHAN:

Business Secretary, Vince Cable, is with me now here at the Lib Dem Conference in Birmingham, a very good morning to you Mr Cable.  Just picking up on what Adam Posen has been saying, first of all his concerns there about the economy, about growth, you must share that?

VINCE CABLE:

Yes, I do and I think his analysis is basically right.  The government has been doing the right things in getting the fiscal deficit problem dealt with, we’re getting a reward for that in very low interest rates which is good for tax payers, good for the environment for business but nonetheless we now have a very serious problem of weak demand.  Consumers want to spend less as they are sorting out their debts, governments are having to tackle their deficits and this potentially has the effect of dragging economies down abroad and here and his response, Mr Posen’s response was we’ll use all the fire power of the Bank of England, the monetary authorities, does seem to be the right approach.

DERMOT MURNAGHAN:

But there is an analysis, and you hear it from the opposition, saying you are making matters worse with the austerity programme.  Here we are in this spiral and if we start sucking so much money out of the economy then you depress growth even further.

VINCE CABLE:

Well the opposition left us the need to deal with the austerity programme because we have the biggest budget deficit of the developed world and remarkably, in the current turbulence, Britain is seen as one of the safest countries because we’re grappling with that problem and it has very real concrete benefits because it has pushed down the basic interest rate that the government pays on its debt, this in turn reduces the cost of capital for business, so it has real tangible benefits and the government cannot waver from fiscal discipline, the consequences of that would be very serious and it is grossly irresponsible to just spend our way out of it.

DERMOT MURNAGHAN:

But even at the cost, Mr Cable, of seeing recession again on your watch in government?

VINCE CABLE:

Well it isn’t at the expense, there is no need that we should get into that position and that’s Mr Posen’s analysis and mine, that there are things we can do to fight the problem of weak demand.  You have to have a tough approach to monetary policy and he’s argued the use of quantitative easing but in a more imaginative way that supports credit.  There is already a lot of flexibility within our government's fiscal policy, if the economy slows down the deficit temporarily widens or so-called stabilises.  We can be more imaginative or forceful in the way that we promote the infrastructure which is the thing that Nick Clegg and I have been talking about.

DERMOT MURNAGHAN:

I want to talk about that in a moment, Mr Cable, but the idea of being imaginative, does that mean Plan A, Plan A plus, Plan B, Plan B plus, does that mean that you can slow down the deficit reduction programme?  Is that what you mean by flexibility and imagination?

VINCE CABLE:

No, it doesn’t mean that, it means sticking to our fiscal mandate, our fiscal mandate has flexibility within it as the Chancellor has made clear over the last year.  What we have been talking about in terms of infrastructure, there is a vast amount of private sector money in institutions like insurance companies and pension funds looking for a home in productive investment and infrastructure.  We badly need new energy, transport, communications of various kinds and it is getting that money flowing and that’s quite a complex problem, it’s about planning, it’s about regulation and we’ve got to unlock that quickly.

DERMOT MURNAGHAN:

The feel is though isn’t it that the house is on fire and you talk about long term and infrastructure projects, there’s two questions there and you’ve addressed one of them partially there about where the money comes from to invest in these projects but of course they take an awful long time to come to fruition.

VINCE CABLE:

Well I think the house is on fire is probably a rather excitable way of putting it.  There is a problem, a very real problem and it’s an immediate problem and that’s why we have to look at the issue about how you support demand and the best way of doing it is the use of monetary policy, we can’t cut interest rates any further but there is the possibility of promoting credit, particularly credit to small business, using the Bank of England, it’s monetary policy, quantitative easing, as a technique.

DERMOT MURNAGHAN:

Of course you’d like to see the banks providing that credit and they still aren’t doing it.

VINCE CABLE:

Well there has been some increase, the government as a result of the Merlin agreement, the banks are increasing their lending, they could and should do more but I think a lot of that’s a cultural problem.  Over the last ten years they retreated from relationship banking with local small business, it’s now coming back, building up the relationships with small companies, supporting them but turning that round is difficult but we’re working on it hard. 

DERMOT MURNAGHAN:

Okay, Secretary of State, stay with us if you would, Vince Cable there.  We’re going to take a short break now.

Welcome back to Murnaghan and I’ve still got the Business Secretary, Vince Cable, here with me, Mr Cable talking before the break about the risks to the economy, the internal risks but the external risks are huge in terms of what’s going on just across the English Channel within the Eurozone.  Are we powerless there to help?  We’re not in the euro and we don’t want to stump up more than we can to bail out Greece and Italy and Portugal and whoever else.

VINCE CABLE:

Well it is enormously important for us that the Eurozone succeeds, it’s crucial for our trade, it’s crucial for the stability of our banks that they head off this crisis.  We can’t directly influence it because we’re not members of the Eurozone but I think we have to make it very clear that it is in our interests that they solve their problems and the problems are soluble.  There is a set of things they know they have to do, one of which is writing down Greek debt, another is providing plenty of liquidity if other countries are affected by contagion, speculation, they know they have to co-ordinate and co-operate more and they are going to have to Europeanise the debt of the sovereign countries.  The problem is the political will to do those things. 

DERMOT MURNAGHAN:

It’s interesting though that within the coalition, the analysis seems to be joining up here from the Conservatives, many of them have been Eurosceptics for a long time, a lot of Lib Dems like you have been quite keen on Europe for a while saying that there needs to be a more unified approach within that Eurozone and a more federal approach, that inevitably you can’t have 17 different countries deciding their own monetary and fiscal policy, you have to pull that together and that might be part of the solution.   

VINCE CABLE:

No, we are united on this issue and I think our Conservative colleagues have not indulged in scoring cheap points.  They know it’s crucial for us as a country that the Eurozone succeeds and that may well involve total integration in the Eurozone.

DERMOT MURNAGHAN:

But the reason many of those Conservatives are so tied to integration is that it locks the UK out even more, that we would never join something like that.  Do the Lib Dems still have that view, that ultimately we could be really at the heart of Europe and that will mean being in the euro?

VINCE CABLE:

I think that’s way out of our current time … No, no, we’re not agitating for that, this is not a time to think about joining the Eurozone, it’s got to sort its problems out.

DERMOT MURNAGHAN:

I didn’t say that but is it an aspiration?

VINCE CABLE:

No, it isn’t.  It could happen in the distant future, we don’t know what will happen, we’re going to keep our options open but we must solve this problem.  As far as Britain’s concerned what we do not want to be locked out of is Europe which is crucial for our trade and we have to press ahead with initiatives like the central market, deepening the central market is one of the things which potentially could get put on the back burner if we lose commitment to the euro.

DERMOT MURNAGHAN:

Let me talk to you about stimulating the economy, we touched on that before the break and you talked about some of the fiscal measures you might have. One of them clearly is not going to be in the near future cutting the very high rate of tax, that 50p rate on the very high earners.

VINCE CABLE:

Well the Liberal Democrat approach to this is we’ve got to have fairness. These are very difficult times and people are being squeezed, our living standards are being squeezed, we’ve got imported inflation, we’re a poorer country after the financial crisis so we can’t expect ordinary families to take the squeeze whilst people at the very top are being put through tax measures, everybody has got to share, so it’s a matter of fairness.  There are alternatives to the 50p tax rate, you are familiar with our party policy that very valuable property could pay a little bit more in tax as an alternative but that’s something that we have to discuss within the coalition. 

DERMOT MURNAGHAN:

Just to be crystal clear on where the Liberal Democrats stand on the 50p rate because there seems to be a message from some … give us a line in the sand on this – it has to stay even if the Treasury ultimately finds out that it doesn’t really raise very much revenue, it’s there because it has to be there to send that message of fairness out there or are you saying, well, it could go if it’s replaced with something else?

VINCE CABLE:

Yes, that’s exactly it, if we do have an alternative which our Conservative partners will work with, which is tax on property wealth which is very practical and fair, then we can certainly look again on the 50p tax rate but there has to be a tax measure in place which makes it absolutely clear that the wealthiest people in the country are making their contribution.

DERMOT MURNAGHAN:

So what level would it go down to, back to 40p where it was or there was a 45p floated around by Labour when they were government, they were originally going to put it up to 45 but then went to 50.  Do you think 45 is about as far as you could go?

VINCE CABLE:

No, now we’re getting in to technical detail.  The basic principle is clear, we have to have tax measures that create a sense of solidarity in the country and it can be done with different ways.  We will no doubt be arguing this autumn and in the run up to the budget what those measures are but I’m certainly not negotiating the details here.

DERMOT MURNAGHAN:

Okay but there are other measures around which seem to be standing out round here amongst the activists sending out that signal to them from the leadership – it’s a bash the rich agenda that I’m reading in my papers this morning, the issue of the 50p rate, Danny Alexander talking about recruiting more tax inspectors to clamp down on tax avoidance and tax evasion and I know you’re talking about getting in to the boardrooms and trying to make sure that executive pay doesn’t become too excessive.

VINCE CABLE:

No, I’m not actually in favour of bashing the rich.  If we have entrepreneurs who create business, create wealth, create jobs, they should be rewarded, I’ve no problem with that.  The issue of executive pay is a rather different one, what’s happened in the last decade is that executive pay has risen massively at a time when ordinary share prices for the owners of companies which basically you and I and everybody who has got a pension fund or an insurance, they haven’t risen at all and basic salaries haven’t risen so something is not right here, there are rewards for failure and that’s what we have to deal with.  What the discussion paper is that we’re talking about is looking at the various options by which the owners of companies, the shareholders, can exercise more effective control.

DERMOT MURNAGHAN:

But there does seem to be a co-ordinated measure, as I say, on these issues, is it for the Lib Dem faithful here who, let’s face it, have had a really torrid time over the last year as local election results, loss of all those councillors, loss of the AV vote, they need something, they need a bit of honey whispered into their ear don’t they?

VINCE CABLE:

No, this is not a party faithful issue, this is for the country and if you look at national polls they show this repeatedly but people do understand that the country has been through a terrible financial crisis, there are continuing problems, there is a squeeze on living standards and people will I think accept that and will accept the disciplines providing everybody is sharing in it and we don’t have a culture where a small minority are getting enormous rewards particularly if they are failing.

DERMOT MURNAGHAN:

I couldn’t talk to you here in the West Midlands without mentioning Jaguar Land Rover, are you hopeful there of some industrial light at the end of the tunnel in terms of their announcements?

VINCE CABLE:

The British car industry is doing very well, all the car companies are expanding, exporting, bringing back their supply chains.  Certainly I’m working very closely with them and it is one of our success stories along with aerospace and along with much of the manufacturing sector because after decades of industrial decline, we are now seeing some of the strengths of what remains in British manufacturing and it helps the whole idea of rebalancing the economy, exports, business investment, manufacturers and that’s one of my absolute key priorities.

DERMOT MURNAGHAN:

Lastly, Secretary of State, can I just ask you about the issue of the Boundary Commission looking at this idea of redrawing some of the boundaries which also affects you personally in terms of your constituency and the idea of cutting the number of MPs to 600?  You talked in the past about certain unfairness’s you feel in that process, is that because it directly affects you or because you …?

VINCE CABLE:

No, it shouldn’t be about individual politicians and their future careers, if they have one, that’s not the issue.  There is a coalition commitment to reduce the number of MPs, we’re committed to deliver that but we’ve also got to look at the boundaries in detail.  There is an issue about whether these new constituencies genuinely represent communities and people’s sense of local identity but we’ve got to work that through but there is an absolute coalition commitment to tackle the problem of the number of MPs and I think the public share that view.

DERMOT MURNAGHAN:

Okay, Vince Cable, thank you very much indeed, the Business Secretary there.