“The banks, the banks. Brown’s utter failure to stop the greed of the banks, which has now created this recession, which has hit so many people, so hard.
“Remember Vince Cable standing alone in the House of Commons saying this can’t go on, and neither the Conservatives, nor the Labour party, realising we were right and they were wrong.”
Nick Clegg MP, leader of the Liberal Democrats, 6 April 2010, Lib Dem London HQ
Cathy Newman checks it out:
He’s the wise wizard, the party prophet, the savvy sage… and he’s all over the side of a battlebus near you. The Liberal Democrats are deploying their Treasury spokesman like there’s no tomorrow.
They think he’s become something of a national treasure, since predicting the recession, warning of unsustainable consumer debt and a housing market crash.
But is Cable’s reputation as the voice of economic sanity really deserved? Time for FactCheck to take a look.
Over to the team for the analysis
A decade ago, Cable was, it seems, a supporter of Gordon Brown’s light touch economic policy, the loosening of financial regulation which has subsequently been the focus of so much criticism.
At the second reading of the Financial Services and Markets Bill, which ushered in the ‘light-touch’ policy, Cable said: “I want to express broad support for the bill, whose philosophy and whose architecture of financial regulation reflect a broad consensus.”
Yet by the time of an interview with the New Statesman last year – 29 June 2009 – he had concluded the philosophy was now wrong. He said: “One lesson of the financial crisis is that the ‘light-touch’ regulatory approach was a failure.”
The Lib Dems told FactCheck: “At the time, and as the extract from Hansard illustrates, Vince made it clear that a balance has to be struck between regulation which protected consumers and maintained market stability without becoming so onerous that it was unworkable.
“While light-touch regulation was not at the time wrong, in principle the credit crunch has made it clear that the way this regulation was carried out was entirely inadequate.”
And how consistent has Cable been on another subject – Bank of England independence? In September 2008, he told the party faithful that government must not compromise the independence of the Bank of England by telling it to slash interest rates.
Yet the next month he told the same party members: The Chancellor should write to Mervyn King [bank governor] demanding the monetary policy committee assume a temporary central role in countering the economic crisis, thus allowing for large interest rate cuts.
The Liberal Democrats responded: “Vince has always supported BoE independence… In the unprecedented emergency of September 2008 he was the first leading politician to call for a drastic cut in interest rates and the BoE implemented that policy shortly afterwards. In no way did that represent a change of view about the importance of the independence of the BoE.”
And is Cable also blowing hot and cold on the fiscal stimulus?
He told the BBC on 29 October 2008: “During a recession it is inevitable that the budget deficit will increase. However, it is entirely wrong for the government to assume the economy should be stimulated by yet more public spending rather than tax cuts, particularly for the low paid.”
But just a few months later he was telling parliament that the fiscal stimulus is necessary, and the best way of providing it is through properly targeted public investment.
“We were consistently critical of the use of VAT cuts as a stimulus to the economy,” a Liberal Democrat spokesman said, “as it primarily benefits high spenders (i.e. high earners) and argued that it was much more sensible to use capital spending in ways that supported the construction industry, in particular at the height of the recession. We have consistently argued that tax cuts which benefit low and middle income earners will be of wider benefit to the economy.”
And finally, in January last year, Cable described the policy of quantitative easing as “the Robert Mugabe School of Economics“.
Yet in March 2009 he told the media that “directly increasing the amount of money flowing into the economy is now the only clear option.”
The Lib Dems said: “Vince made it absolutely clear from the outset that QE was necessary in the emergency conditions in which we found ourselves. The policy is inherently dangerous if in the wrong hands and therefore needed to be managed with a great deal of care which is the point that he is making in the Indie article if you look at it in its entirety.”
But credit where it’s due. Cable was warning about excessive consumer debt years before anyone else tumbled to the problem. In November 2003 he challenged the then-chancellor Gordon Brown about “the brutal truth” that “the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?”
Cathy Newman’s verdict:
Vince Cable has been widely praised – and rightly so – for warning of the dangers of Britain living off credit. But the Lib Dem eulogies need to be treated with some scepticism. Like any politician, when the facts change he changes his mind. Which goes to show that Saint Vince is human after all.