In my Money Week column this week, I've been explaining why Vince Cable would be a calamity as Chancellor. Here's a taster....
There is little doubt who most ordinary people would like to see as Chancellor after the election. Not the granite-faced Alistair Darling, and certainly not Gordon Brown’s mini-me, Ed Balls. Not George Osborne either. The Liberal Democrat’s Vince Cable would waltz to the top of any popularity poll.
For most of the last few years, there was as much chance of that happening as of Gordon Brown admitting he’d bankrupted the country. The Liberal Democrats didn’t have so much as a sniff of power. Saint Vince, the Sage of Twickenham, could pontificate in an amiable, genial manner, and everyone could say how marvellous he was, without ever having to worry for a single second that the man might actually get his hands on the battered red box come Budget day.
And now? In the space of a week, all that has changed. In the wake of the first televised debate between the three part leaders, Liberal Democrat support has surged. On Monday, one poll even gave the party the largest share of the vote. A hung parliament looks a real possibility, with Cable as Chancellor the price of Lib Dem support.
It would be an easy concession for either of the other parties to make. He’s popular and looks competent. But what are Cable’s policies, and what’s his record. So far it has escaped any real scrutiny. But take a look at what the man actually says, and it is either confused or ridiculous. He flip-flopped during the financial crisis, supported Brown’s reckless Keynesian public spending splurge, and has offered a muddled and platitudinous manifesto for the election.
At precisely the moment when the UK will run the risk of a meltdown in confidence in the capital markets, Cable is the very last person you would want to see as Chancellor. If he gets the job, man the lifeboats.
It’s not hard to understand why he’s popular. He has a genial, friendly manner. He talks human, unlike many politicians, and certainly much more than his two main opponents. He has a knack of taking difficult concepts and explaining then in ordinary English. For a country used to Brown’s impersonation of a mid-level Soviet bureaucrat reciting tractor production statistics it makes a refreshing change. There is a lot of pain ahead for the British economy before the economy is put back on an even keel. Cable has the knack of putting a human face on that.
The trouble is, his reputation is absurdly over-inflated.
Cable makes much of the fact that he forecast the financial crisis. In reality, the evidence is fairly scant. True, he made a few speeches warning about rising house prices and debt levels. He suggested a couple of times that Brown hadn’t really abolished boom’n’bust.
But he didn’t really say anything that the Conservatives, or the Bank of England Governor, or indeed dozens of financial pundits weren’t saying. Nor did he warn of the two main threats to be the British economy: Brown’s absurd regulatory regime which handed banking supervision over to the FSA, and meant we had a worse banking collapse than any other major country: or the massive build up of public spending that had so undermined our competitiveness. Indeed, his party went into the last election advocating even higher spending.
In response to the financial crisis, Cable flip-flopped all over the place. His policy on the banking crisis changed from one interview to another. At one point he opposed the policy of quantitative easing, then he supported. He backed Brown’s massive Keynesian splurge, then, with an apparently straight face, started warning everyone about the dangers of the deficit. Through all of those positions, you’ll search in vain for anything approaching coherence or consistency. The closer you look, the more Cable appears to be just mouthing off into the nearest Radio 4 microphone.
Worse, his manifesto pitch is dismally weak. The UK is facing its most serious economic challenges for a generation, and yet Cable is unable to offer anything more than platitudes.
Cable claims he is he is being honest about cutting the deficit. Yet his main proposal is cancelling the Trident nuclear missile system, which isn’t going to save money in the short-term. The rest he tells us it will be done by ‘closing loopholes’ in the tax system. But the draconian, bullying tactics of the Inland Revenue have already started driving companies out of the UK. Another clampdown is only going to make that even worse?
His proposals for tax reform are even stranger. Cable wants to raise the tax threshold to £10,000. Fair enough. It is indeed shocking that the someone struggling to make end meet on earnings of less than five figures should have to pay income tax. But how’s it paid for? More clampdowns on loopholes. And taxing capital gains at the same rate as income tax. There is something to be said for levelling all taxes. But a capital gains tax at 50%? Presumably the intention is drive every last remaining entrepreneur out of the country.
Meanwhile, his ideas for re-booting the British economy verge on the comical. One idea: Regional stock exchanges “without the heavy regulatory requirements of a London listing”. But the reason the Manchester and Liverpool exchanges withered was because no one really wanted them – the telephone meant it was just as easy to do business in London. And if regulation is any lighter, won’t they just be a playground for spivs and fraudsters? Haven’t we just been through enough financial scandals without creating more?
Most of the rest of the manifesto is taken up with fiddly initiatives to promote green investment. It’s just not serious. Britain is the fifth largest economy in the world. Even if we do become a world leader wind farms and solar panels – and we have a long way to go to overtake the Germans – it’s not going to make much difference.
There is nothing about the need to lower corporation tax to attract foreign investors. Nothing about protecting all the foreign currency the City brings into the country – just populist banker bashing. Nor is there any explanation of how joining the euro – still a Lib Dem plan - will stop us turning into another Greece. But then Cable isn’t really a serious politician. And if he does make it to Number 11 in early May, the currency markets will conclude the country isn’t serious about tackling its economy either.