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Mon 6th Oct 2008:

Cable: Government must be clearer.

Liberal Democrat Shadow Chancellor, Vince Cable has called for the Government to be clearer in its response to the financial crisis. Speaking after Alistair Darling pledged to do whatever was necessary to support the banking system, Mr Cable called for all parties to work together in the national interest. He insisted it was “not a time for recrimination about past mistakes”, but argued that the Government must be clearer about its plans while people are so anxious about their savings. Mr Cable said: “In relation to bank deposit guarantees, it seems to us that if the Germans are to make an explicit guarantee to protect depositors savings we shall have to do the same for the UK high street banks. “Of course deposits are totally safe. “But people are anxious and the Government needs to make it clearer than it is doing, what depositor protection actually means. There are questions about accounts in merged banks, small private businesses and large sums temporarily on deposit during a house sale. “Second, the Government’s case by case approach to bank failures has been sensible so far and the right one in the case of Bradford and Bingley and the Lloyds-TSB - HBOS proposed merger. But we are in a dangerous environment in which banks are being picked off one by one. “I made proposals yesterday in a Sunday newspaper and the Conservatives have done the same, supporting re-capitalisation of banks based on part-nationalisation. Such a scheme would protect the taxpayers’ interests better than a US style bail out. “If the Chancellor cannot say any more now can he confirm that this issues is under discussion with the bank chiefs at their regular meeting at 6pm. “Third, the central question is the availability of credit as much as the cost. But official interest rates are also vitally important for millions of mortgage borrowers and businesses. “I have been for the last decade a strong supporter of the independence of the Bank of England and made my maiden speech on the subject in 1997. The Bank must remain politically independent. “I believe, however, that it must be spelt out by the Chancellor that its mandate must include the possibility of decisive action, including a radical cut in interest rates, to head off financial and economic meltdown. “Deflation, not inflation is currently the risk. Some members of the MPC who are arguing that the crisis is confined to the financial sector need a line of communication to Planet Earth. “The Chancellor has called my comments dangerous. I recognise the dangers but we live in very dangerous times and emergency action is needed. Millions of jobs and livelihoods depend on decisive action in the next few days and weeks.”  

Sun 5th Oct 2008:

Cable: To halt the bank tsunami, slash interest rates.

The Chancellor should write to Mervyn King asking that the monetary policy committee assume a temporary central role in countering the economic crisis, thus allowing for large interest rate cuts says Liberal Democrat Treasury spokesman, Vince Cable. The rules of financial seamanship devised for calm waters and the occasional moderate storm are not proving much use in the face of the tsunami bearing down on us. Panic is the all-too-human reaction. And fear. Leadership is required. Leadership will not come from a committee of economic ministers standing behind the chancellor, debating where to steer and fighting for control of the tiller. There has to be a sense of policy direction. Fortunately there are lessons to be learnt from previous financial tsunamis. The first relates to monetary policy. There is now a severe monetary squeeze taking place, even though official interest rates are negative in real terms in the United States and low elsewhere, including Britain. Banks are hoarding cash and trying to avoid all but the safest customers. After the disappearance of new mortgage lending, lines of credit are being pulled from companies and individuals. History teaches us that interest rates should be slashed during a banking crisis to stave off deep recession. This has happened in the United States, but not in Britain. The approach of the Bank of England's monetary policy committee, dictated by its mandate, is to balance deflationary against inflationary risks with, in practice, occasional small adjustments in interest rates. The committee is in danger of becoming irrelevant in an environment where short and medium-term inflationary risks are massively outweighed by the danger of a once-in-a-lifetime collapse of the financial system. Central bank independence must be maintained - not least because, after the crisis has passed, intervention by governments could have big inflationary consequences. What is required is for the chancellor to write to the governor saying that on a temporary emergency basis the committee should assume a central role in countering the crisis with a large cut in interest rates. A big cut - conceivably as much as two percentage points - would have a big psychological impact on consumer and business confidence when it is most needed. Second, a far-reaching approach is required for the banks. Hitherto the Bank has provided unlimited liquidity (at a penalty rate and against sound security). Beyond that, banking crises have been dealt with on an ad hoc basis with, now, two nationalisations, an officially orchestrated merger (Lloyds TSB/HBOS) and various takeovers (Alliance & Leicester by Santander; smaller building societies folded into Nationwide). That approach has been right. The danger, however, is that the collapse in investors' confidence in banks could result in the remaining high street banks being picked off, one at a time, resulting in a succession of messy nationalisations or forced mergers. There is a case for a more systematic approach. A good model for managing a banking crisis is Sweden. After the collapse in the property market in the early 1990s, not dissimilar from America and Britain today, the banks had insufficient capital and there was a confidence crisis. The focus was on recapitalising the banks. Debt-equity swaps and new equity issues were generated under a government-managed programme. The government either nationalised banks or acquired a stake in them. When the banks' balance sheets were sufficiently robust and economic conditions had improved, the government sold its stake (and made money for the taxpayer). A variant of the Swedish model could be applied here. One step would be to help banks to raise fresh capital from the markets. At present banks cannot make rights issues because share prices are depressed and confidence has gone. Even in better conditions, underwriters have been left with a large chunk of shares. Were the government to agree to act as underwriter (for a fee) it is much more likely that capital would be raised or, if not, the government would acquire convertible preference shares and hold them up to the underwriting limit. The shares could be sold later, as in the Swedish case, but in the meantime they would generate an income for the taxpayer. The financial crisis has touched only the edges of the real economy. Nobody seriously expects that to last. There has to be a coherent government response starting with the most vulnerable part: housing. It would be wrong to try to prop up house prices which still have some way to fall to restore affordability. A better approach would be to use the £8 billion the government has committed to social housing for social landlords to buy surplus land and property at the hefty discounts being offered. A large programme of social house building and property acquisition would help to reduce housing need and revive the sheltered house building industry while creating a public sector asset. Beyond that lies the need for a new regulatory deal with the financial community. This should not be done when the public mood is understandably for hanging, drawing and quartering anyone connected with banking, although there is scope for some early practical reforms linking bank capital requirements to the economic cycle. There will be time enough for post-tsunami reconstruction. The priority now is disaster management. Vince Cable is the Liberal Democrat Treasury spokesman

Fri 3rd Oct 2008:

Clegg: Europe has to work together to end this turmoil.

Writing in the Financial Times, Nick Clegg calls for a Europe-wide response to the financial crisis that is both systemic and consistent. Traumatised by the devastation of the second world war, the founders of the European Community were guided by a simple insight: economic integration and stability are the cornerstones of peace and prosperity. Economic meltdown and nationalism in the 1930s created the seedbed for extremism and war in the 1940s. So, as EU leaders meet at an emergency summit this weekend, Europe's history provides them with a stark lesson: collective action is vital in the face of an economic crisis that recognises no borders. As national governments scramble to come up with their own solutions for the turmoil in their financial markets, the risk of beggar-thy-neighbour policies is becoming apparent. When the Irish government announced this week that it would extend a 100 per cent guarantee for all deposits in Irish banks, savers promptly moved their money from other European banks to Irish ones. Such dissonance in the policy responses between interdependent European economies is a recipe for uncertainty. This is the last thing we need when markets and consumers are suffering a crisis of confidence. So this weekend's summit must draw a line under the ad hoc reactions of national governments and start spelling out a response that is systemic and consistent between one country and the next. First, a broadly similar approach to depositor protection must be adopted. We have the perverse situation where levels of protection vary not only between countries but, in the UK, between banks too. Those with savings in Barclays can expect protection up to £35,000 (€44,000, $62,000) while those with Northern Rock or Bradford & Bingley are fully protected. Such discrepancies are unsustainable. The level to which deposits should be protected is an issue of much debate. But one thing is certain: in an open European market the playing field must be level. Second, the EU must urgently decide where it stands on the application of existing state aid and competition rules. Individual states have already unilaterally waived competition rules because of the exceptional gravity of the crisis, such as in the UK with Lloyds TSB's takeover of HBOS. It is now time for Europe as a whole to decide whether in the short term the public interest is best served by the continuation of competition and state aid rules or whether a more flexible approach for a temporary period of time is justified to facilitate private sector solutions for failing banks and to boost depositor confidence. Third, we must forge a common approach to credit rating agencies that failed so spectacularly to identify the huge and accumulating risks in the banks they were rating. While they must not be made into scapegoats for the failings of lenders, they must be subject to higher levels of scrutiny and transparency. Compelling them to publish in full who is paying their fees would be a good start in eliminating any suspicion that they may have been operating under conflicts of interest. Fourth, the EU must play a pivotal role in redesigning the architecture of the international financial system. The Bretton Woods institutions, designed to deal with the challenges of the 20th century, have been impotent when faced with a 21st century crisis. Banks are global entities and, as the credit crunch has shown, their actions in one or two regions have a ripple effect across the world. In this corporate world without borders we must now consider the case for an international watchdog with real powers to identify and prevent systemic risk. Finally, European leaders must demonstrate that they can learn from each other to sketch out a systemic approach to the future of financial services. The Swedish response to its own banking crisis in the 1990s and the more stringent approach of Spanish regulators to the use of new financial instruments are two examples that may provide a guide to policy responses. While the immediate task is to restore liquidity to lenders and confidence to depositors, wider public faith in European capitalism requires leadership beyond existing ad hoc reactions from national governments. We are in the eye of a storm, the enormity of which we still cannot fully grasp. It is difficult for policymakers to work with others when they are barely able to keep track of what is going on in their own backyard. But the corrosive effect of fear and panic will only lift once we start working with each other and planning for the future. That is the challenge - and opportunity - for Europe's leaders. The writer is leader of the Liberal Democrats Original Financial Times article.

Tue 30th Sep 2008:

Liberal Democrat Economic Recovery Plan.

Measures in the Economic Recovery Plan include tax cuts for low and middle income households, stopping unnecessary repossessions, action to cut energy bills and moves to stop reckless banks jeopardising economic security. Click here to read the Liberal Democrat Economic Recovery Plan Introduction from Vince Cable MP, Liberal Democrat Shadow Chancellor Gordon Brown's response to the economic crisis has been too little, too late. For years I warned him of the oncoming economic problems. Unsustainable levels of personal debt, mostly secured against the illusory ‘wealth' of rising, vastly inflated property prices. An economy based so heavily on debt was never going to be in a fit state to deal with global shocks like the credit crunch. And so it has proved. Gordon Brown is now facing the consequences of his years of inaction. The housing bubble has burst. Unemployment is rising fast. Tens of thousands of families are losing their homes. With people struggling with massive debts and fast rising bills it is now almost inevitable that the UK is heading for recession. Gordon Brown used to boast we were better prepared than our competitors for a downturn. Yet the OECD's respected economic forecasters now predict we will fare worst among the world's seven leading economies (G7) in the current crisis. What Britain needs now, and urgently, is practical action to help people who are struggling - to put money back in their pockets, to cut their energy bills, and help them keep their homes. Gordon Brown and Labour can't offer that. They got us into this mess. Now they are veering between complacency and anic. Dithering on key decisions, muddling along on half measures. David Cameron and the Conservatives won't offer it. At a time when those on the breadline are struggling more than for a generation, their top priority is tax cuts for millionaires. It's not good enough to just keep muddling along and hoping. We need a serious plan to get Britain's economy up and running again. That is why Nick Clegg and I have put together the Liberal Democrat Fairer Future Economic Recovery Plan. Our plan would: Put more money in people's pockets - tax cuts for people on low and middle incomes,  Stop unnecessary home repossessions and provide more affordable housing, Make energy companies reinvest their windfall profits in cutting bills, and Deliver extra help for people in debt or who lose their jobs. And we will bring the free-wheeling, ‘anything goes' short-termism of the City to an end. We cannot continue with a culture where bankers pocket big bonuses for taking reckless risks, but when things go wrong government and taxpayers have to step in to pick up the pieces. Please read the plan, and share it with other people you know. There is only one party in Britain today with a serious and credible plan to get Britain's economy back on its feet - and to provide real help to those struggling in the meantime. That is the Liberal Democrats. Vincent Cable MP Liberal Democrat Shadow Chancellor PS. With events developing as rapidly as they are you might also want to check out the latest statements from me and my colleagues on the economy section of the party website. And if you want my broader take on the current economic situation you might want to read my speech from the recent party conference in Bournemouth.

Clegg: Government must guarantee all bank deposits to protect British savers.

Liberal Democrat Leader Nick Clegg has called for all bank deposits to be protected as the global financial crisis deepened. Speaking in the wake of the failed vote on the American bail-out package in the US Congress, Mr Clegg said the Government must temporarily guarantee for all deposits in the British banking system. With share prices plummeting following the failed vote and the numbers of new mortgages falling sharply, Mr Clegg also called for cross-party talks on how to deal with the crisis. Nick Clegg said: “We are now in the eye of an economic storm. “The financial system urgently requires some breathing space. British people need total reassurance that their savings are safe. “The Liberal Democrats will support the Government in issuing a blanket guarantee for all deposits in the British banking system. We will co-operate fully with the Government in passing depositor protection legislation next week when Parliament reconvenes. “But today a copper-bottomed guarantee that all people’s money and savings in British banks are safe must be the priority. “Then, in the longer term, all parties must work together to find common solutions for a re-regulation of the City. “We have seen the dreadful effects of the bonus culture in the City that has led banks to take unacceptable risks for short-term gain ahead of long-term stability. “If we are going to reverse the greedy banking culture that went on for too long, we need to start at the top. This means an end to all bonuses for boards of directors in British banks that do so much to fuel short-term speculation. Giving them salaries, if necessary very generous ones, will create fewer risks in the future.”

Mon 29th Sep 2008:

Vince Cable: Osborne playing a hopeless game of catch up.

Vince Cable today accused his Tory counterpart George Osborne of “playing a hopeless game of catch up” over the financial crisis. The Conservative frontbencher addressed his party conference today to set out his economic proposals, which included a proposal to freeze council tax rises for two years. Dr Cable said: “Rather than making tough economic choices over tax and spending, George Osborne is simply passing the buck to local councils, expecting them to make arbitrary cuts. “This false promise of freezing council tax will be entirely dependent on individual councils being able to cut their budgets, which is likely to leave the poorest areas with continuing council tax rises.” Dr Cable also criticised Mr Osborne’s “vague aspiration of national tax cuts at some point in the future”. He added: “This country needs a party that is willing to take the tough choices today to reduce the tax burden for people on low and middle incomes hit hardest by the financial crisis.”

Fri 26th Sep 2008:

No Choice but Change for Britain’s defence policy .

Today Sir Menzies Campbell will publish a report into the state of the ‘military covenant’ and Britain’s defence policy. The report, commissioned by Liberal Democrat Leader Nick Clegg, sets out the tough choices required if the ‘military covenant’ is to be honoured. Sir Menzies argues that unless defence strategy is fundamentally overhauled with a new Strategic Security and Defence Review, military personnel will continue to suffer from the strains of over-commitment and inadequate equipment. The four broad options Sir Menzies sets out are: Carry on Regardless - continue to base defence policy on the strategic assumptions of the 1998 Strategic Defence Review (SDR), without the financial commitment to address shortfalls in the equipment budget. This will lead to a slow decline in capability and in Britain’s standing and influence in the world. Do Everything and Do it Properly - fund the assumptions of the 1998 SDR properly to maintain both expeditionary and large scale war fighting capability. This would require significant net spending increases for the Defence Budget. Roll Back –replace the expeditionary strategy with one of strict regional defence contributing to NATO and European defence assets for the purposes of protecting the region from direct attack. Such an option would be unpopular with allies and would diminish Britain’s influence in the world. Focus on the Wars of Today – prioritise expeditionary and peacekeeping missions over full-spectrum war fighting capabilities. This would see prioritisation of armoured vehicles, helicopters, strategic lift and intelligence gathering technology over large scale procurement such as fighter jets, aircraft carriers, and submarines. Reliance on NATO and EU capabilities would increase. Nick Clegg MP, Leader of the Liberal Democrats, said: “Menzies Campbell has produced an authoritative report that poses all the right questions which the Government has ducked for so long. We cannot continue to ask so much of our armed forces without a long-term defence strategy that is sustainable.” Sir Menzies Campbell MP said: “Our military has been ‘running hot’ for years; its budget is in crisis and there are huge deficiencies in the quality, quantity and utility of the military equipment available for operations.” “Our armed forces are qualitatively second to none in the world. They do a phenomenal job for our country every day, without challenging the wisdom of their deployment, but there are now tough choices to be made” “We have come to a point where there is no choice but change. Either our armed forces should do less and differently, or we need increases in the defence budget which will be difficult to justify to tax-payers.”

Thu 25th Sep 2008:

ID cards a 'laminated poll tax'.

Today’s unveiling of the design for ID cards is another step towards the Government’s creation of a ‘laminated poll tax’, Liberal Democrat Shadow Home Secretary, Chris Huhne, said today. The Liberal Democrats have consistently opposed ID cards, which are being introduced by the Labour Party and were initially supported by the Conservatives. Nick Clegg has already said that he will break the law and refuse to provide his details to the ID Card database rather than sign up for the scheme. Commenting on the new design revealed today, Chris Huhne said: "It does not matter how fancy the design of ID cards is, they remain a grotesque intrusion on the liberty of the British people. "The Government is using vulnerable members of our society, like foreign nationals who do not have the vote, as guinea pigs for a deeply unpopular and unworkable policy. "When voting adults are forced to carry ID cards, this scheme will prove to be a laminated Poll Tax."  

Wed 24th Sep 2008:

Darling’s mood swings back to complacency - Cable.

Commenting on Alistair Darling’s speech at the Labour conference, Liberal Democrat Shadow Chancellor, Vince Cable said: "Talk about mood swings. We had a long period of complacency, followed by total despair a couple of weeks ago, only for the Chancellor to return to complacency in front of his party faithful." Vince Cable continued, saying: “The truth is that the British economy is in very serious trouble. “It is certainly true that the Government’s reaction to the HBOS crisis and short-selling has been sensible, but I’m amazed that Alistair Darling wants to take credit for management of the Northern Rock fiasco. “While I welcome the early indication of a banking reform bill to restore confidence in bank deposits, it isn’t clear that the Chancellor has understood the necessity for regulating bank capital to offset the boom and bust cycle. “Nor is it clear how the Government proposes to use legislation to deal with the problem of the bonus culture, though clearly something drastic needs to be done. “What the Chancellor doesn’t say is whether or not he plans to follow the demands from the United States administration to play Fairy Godmother to the banking system. He must make it clear that the British taxpayer is not going to bail out financial institutions in the same way here.”

Wed 17th Sep 2008:

Liberal Democrats the only party for a fairer Britain – Clegg.

The Liberal Democrats are now the only party that can deliver social justice, and the only choice for anyone who wants a fairer Britain, Nick Clegg said today in his conference speech. In his keynote conference speech, the Liberal Democrat leader also set out the party’s Fairer Future economic recovery plan – four steps to a better economic future. Nick began his speech by focusing on the current economic difficulties, which he described as 'a firestorm', "raging through our financial system, ignited by reckless bankers and fuelled by complacent politicians.”   He turned his fire on both the Government and the Conservatives. Labour, he said, had nothing further to offer the country –   “Stumbling around with no idea what to do. “They are a Zombie government. “A cross between Shaun of the Dead and I’m Sorry I Haven’t a Clue.”   Labour cannot help people, said Nick, and the Conservatives will not bother -   “Cameron’s only aim was to make the Conservatives inoffensive. “Problem is, once you strip out the offensive parts of the Conservative party, there isn’t much left. “Cameron’s hope is to become the Andrex puppy of British politics. A cuddly symbol, perhaps. But fundamentally irrelevant to the product he’s promoting.”   He accused the Conservatives of avoiding any tough policy decisions - “When it’s all “blue skies thinking” – you can say everything, no matter how contradictory. “You can say you want fairer taxes – but propose to spend billions cutting inheritance tax for the very richest in the land. “You can call for the European Union to be stronger against the Russians – while still plotting to break it in two. “You can say you’ll protect civil liberties – and then call for extra surveillance powers “You can cycle to work – and have your driver follow behind.   “They are a say everything, do nothing party.”   Nick said the Liberal Democrats were the party with the ideas that can get Britain out of this mess. He set out the party’s Fairer Future economic recovery plan – four steps to a better economic future.   “One. Action to stop unjust repossessions before tens of thousands of families find themselves on the streets.” “Two. The free-wheeling, bonus-driven, short termism of the City must come to an end. We must stop the amoral culture that sees speculators betting on banks to fail, knowing the taxpayer will pay out in the end. And the madness of bonuses awarded no matter what. “We need a wholly new approach to regulation: limiting, not encouraging, the excesses of the market. And when reckless bankers come with gold-plated begging bowls to ask for shareholders to be bailed out. Our answer should be a resounding No.   “Three. We will put in place the building blocks for future economic stability. Interest rates that take house price changes into account. And independent monitoring of our fiscal rules.   “And finally – but most importantly. Tax cuts for families who are struggling. To help them make ends meet. And keep the wheels of the economy turning.” He reminded party members of  how they had pledged this week to deepen the party’s proposals for fair tax cuts, to make them fairer still – “That means doing the most for those who have the least. It means making sure the richest pay more. And so aiming to make nine out of ten taxpayers better off.   “I want this to be the most progressive – most redistributive – tax plan ever put forward by a British political party. Using just a little of the money the government wastes every day. To help people in their everyday lives.   “That doesn’t mean cutting help for the poorest, of course. It doesn’t mean stopping vital investment in hospitals and schools. It just means taking a cold, hard look at all government spending and asking a basic question: Is it working?” Liberal Democrats, said Nick, “believe ministers should spend money as carefully as if they’d borrowed it from a friend. “We believe that tax is a means to an end and government should not take a penny more than it needs. We believe returning money to people who need it is fair, liberal, and right.”   Nick identified some of the areas where the government is wasting money, before turning to his aim of making Britain the first truly green economy in the world. “I want to see public transport expanded, with investment funded through charges on road haulage. “I want to see homes and businesses become energy efficient – saving money in the process. “And I want a huge expansion of renewable energy – meeting and exceeding the commitments Labour has given up on.”   Nick spoke of the importance of achieving energy independence within the EU – “Independence because our position on the international stage is weakened by the West’s desperate hunger for fuel. “We cower in the shadow of countries we want to stand up to. Because we’re afraid they might turn off our lights. Just look at where we stand with Russia. And in the Middle East. “Dependence on fossil fuels undermines the fight for human rights. It halts the onward march of democracy. It’s got to end.” On domestic policy, Nick set out his aim of making government ‘people shaped’, with benefits shaped around the needs of people and families, not bureaucrats. Patients, he said, should have far more control over the care they get. So people with long term conditions get to be part of designing the care they need. And children struggling, or falling behind, should be helped with extra support – one-to-one tuition or catch up classes, funded by the Liberal Democrat “pupil premium” which targets extra cash at deprived children.   He made clear he is also ambitious for his party, repeating his target of doubling the party’s number of MPs, and promising that at the next general election the party would take a giant leap towards that goal.   “We can do it because we are the vanguard of British politics. “We have been at the forefront of a revolution in ideas. “The first to fight for women’s rights, gay rights, human rights. The first to understand the problem of climate change. The first to see the economic crisis on the horizon. The first to see the vital role of liberal interventionism in international affairs. And the first to see its limits – and oppose the illegal invasion of Iraq.”   “We are a powerful party. We are getting stronger. And our ideas are the right ones to get Britain back on track.”   He encouraged those people who had been drawn to Labour in the 1990s, because they believed in a better future, to turn to the Liberal Democrats as the only people who could now make it happen.   “Labour is finished. It’s over. “The Liberal Democrats are now the only party that can deliver social justice. “The only choice for anyone who wants a fairer Britain.   “A party that will put money back in the pockets of ordinary families. “A party that will build a stable, green economy for each and every one of us. “A party that will change politics so that every person counts.   “The Liberal Democrats. “Join us, and make it happen.”   Click here to read the speech in full

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