Tories take the helm - and Cable gets big economic job

It looks like Vince Cable is going to be in charge of business and banking. Should we be worried?

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Last Updated: 31 Aug 2010

One reason for Vince Cable’s popularity, we suspect, is that nobody really expected him to get anywhere near a position of power. So he’s been able to heckle ‘the two old parties’ (c. the deputy PM) with impunity, secure in the knowledge that he had zero hope of displacing them. But it’s all change now: following the coalition agreement between the Tories and the Lib Dems, which will see both parties govern Britain together, the sainted Vince has been given a senior job in the Treasury, apparently as Business Secretary - which will include responsibility for the banking sector. Given his previous on the subject, the City will be a bit nervous…

What can business expect from the new administration? Well, the short answer at this stage is that nobody really knows yet; it’ll presumably take a few days for the small print of the coalition agreement to come to light. But the suggestion is that there’ll be a big hike to capital gains tax to bring it more into line with income tax (though, crucially, it sounds like it won’t apply to entrepreneurs), while the FT suggests that the employers’ NI hike will indeed be scrapped (although the employee’s hike – effectively an income tax rise – will stay). And in a bid to reassure the markets, the Tories’ £6bn of proposed public spending cuts will apparently go ahead this year.

But its treatment of the City will be fascinating to watch. Cable has consistently taken a harder line towards the banks than almost any other leading politician – arguing for a levy on profits, a complete ban on bonuses, and the breaking-up of institutions that are too big to fail. He’s also said that the nationalised banks should be forced to lend more. Whatever the precise details of his new job - and although there’ll presumably be a degree of compromise - we can expect to see some or all of these coming to fruition. After all, George Osborne has been banging a similar drum (it’s a funny old state of affairs when Labour appears to have the most measured approach to the financial sector). Many in the City are already voicing their concerns about letting Cable loose in the corridors of power.

But surely we should give Vince – and the new Government as a whole – the benefit of the doubt for the time being. We Brits can be a cynical bunch, but some of the sniping about the prospects of the coalition has just been tribal and mean-spirited (as exemplified by those idiots who went to Downing Street with Labour placards to boo Cameron’s arrival yesterday). Being in Government is very different to being in Opposition, and the nature of the coalition will hopefully encourage sensible compromise. Besides, it’s surely a good thing that clever and competent people like Cable are involved in the decision-making process.

The markets have broadly welcomed the deal: sterling is up, as are Government bond prices. And until events prove otherwise, we’re also going to remain optimistic that this coalition can achieve good things – albeit in an extremely unpromising environment.


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Tories take the helm - and Cable gets big economic job
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