Vince Cable gets his mojo back

Like Ronald Reagan facing down the Soviet Union, Vince Cable has managed to win his “war” with Rupert Murdoch without needing to fire a shot. So it’s perhaps no surprise that the Business Secretary has rediscovered his mojo on banking reform too.

In its interim report in April, Sir John Vickers’ Independent Commission on Banking ruled out a full separation of banks’ retail and investment arms, recommending “ringfencing” the two functions instead.

At that time Vince Cable, still smarting from the Telegraph’s reprehensible sting, went along with the verdict, no doubt calculating that a ringfence was better than nothing. And with George Osborne’s approval of ringfencing at the Mansion House speech in June the deal seemed done.

Yet in a remarkable speech* yesterday the Business Secretary sought to put a full separation back on the table.

He noted that:

“The ‘ringfencing’ approach has been criticised for being insufficiently clear cut and too open to regulatory arbitrage by those arguing for full separation.”

And that:

“The Treasury Select Committee has expressed some surprise that the ICB did not explain why it was not pursuing this approach [full separation].”

This is significant. As I pointed out when the interim report came out, the commission utterly failed to justify its decision to rule out major surgery on the banks. An otherwise intelligent piece of work descended into intellectual mush when it came to explaining why outright functional separation would be a bad idea.

Now Cable has fired a warning shot across Vickers’ bows. In his speech he stressed that the Vickers analysis in April was only an interim report, implying that he expects much better in its final instalment due in September:

“I have confidence in an independent commission of exceptional quality but it now has to provide convincing answers to some critical questions. The Government will be still seeking reassurance from the final report to demonstrate that a ringfence can be as effective as full separation at lower cost.”

He also lays out three “key tests” in this regard:

“Would it [a ringfence] stop banks using deposits underwritten by the taxpayer to cross subsidise their ‘casinos’? Will the ringfence be high enough and the ‘Chinese walls’ strong enough to eliminate regulatory arbitrage by the banks? Will the division between what is inside and outside the ringfence ensure that nothing resembling a universal bank remains?”

That final test is crucial. Cable is saying that he will only accept ringfencing if it has the same practical effect as a formal break up.

This might not be a Whitehall battle that Cable can win. The banks still have formidable lobbying power. And George Osborne seems** to be batting for the financial industry. But with Cable’s political position strengthened since the Murdoch downfall and with the Chancellor under growing pressure for his handling of the economy, it’s no longer a battle that the Business Secretary is destined to lose.

In other words: game on.

*There’s also a classic Cable joke in the speech about the dysfunction in the retail banking market: “People change their banks less frequently than their spouses, and the loyalty is not because of love”.

**In March the Chancellor reportedly offered to rule out a retail/investment separation in order to reach a deal with the banks on bonuses.

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• MsCiaranEthelRehill

  Is that you Vince? Stick to dancing.

• http://allectus-allectus.blogspot.com Allectus

  “i think you’ll find that the DT had decided not to publish. News International then allegedly stole the information and published it.”

  Actually, a whisteblower from the DT passed Cable’s unpublished comments to Robert Peston at the BBC, who – rightly judging that it would be in the public interest to do so – then made them public on his blog.

  Cabinet collective responsibility has nothing to do with unanimity in decision making, but everything to do with public backing for Cabinet decisions, regardless of any private reservations one might have.

  Vince is just trying to cash-in by retrospectively repackaging his buffoonish posturing as an heroic act of defiance, and misrepresenting his basically self-serving hostility to NI as being based on principle all along. Only the gullible will be taken in.

• caledon

  Go on Vince, get stuck in son. The only one of them worth a damn.

• JohnBEllis

  For myself, I’d trust him sooner than the idiot Thatcherite right whose irrational gut instincts substitute for both rational thought and pragmatic analysis – just as their heroine’s so often did.

  But each to his – or her – own …

• bigned

  Conceited he may be.  Buffoon for the dancing,  certainly.   But what does that have to do with the fact that he was right about News Int?  The DT sting was justified in the MURDOCH interest,  but certainly not in the public interest,  unless you are one of the last three people on the planet who still think that the Murdoch interest and the public interest are one and the same thing.  Cable was stung.  It was a pity that the politicians and policemen were not similarly bugged when they were brown-nosing with Brookes,  Murdoch et al.  Wonder why that was.  Mystery.  Eh?

  But the biggest piece of Orwellian irony was dumping Cable because he was biased,  then giving it to Murdoch’s dinner table chum Jeremy Hunt.  He WASN’T biased???  He publicly and brazenly stated several times before the event that he was looking at the merger proposal favourably…..MONTHS BEFORE IT WAS DUE TO COME UP FOR CONSIDERATION.

  No credible evidence of wrongdoing at NI?  We can start with Rebekah Brookes admission (2003?) that they paid the police for information.  Clearly you’ve just woken up from a 20 year state of cryogenic preservation.  Then you can climb the Everest of circumstantial evidence and collaborated statements and that you’ve been trying to not see,  as well as jail sentences,  resignations.  Stop deluding yourself.

  No credible evidence of wrongdoing? HAVE YOU NEVER READ THE THEIR PAPERS??

• http://allectus-allectus.blogspot.com Allectus

  “Conceited he may be … But what does that have to do with the fact that he was right about News Int?”

  As I have already pointed out, Cable’s hostility to NI was largely explained by ideological and self-serving motives. If he had possessed any credible evidence of wrongdoing at the Group, then he should have come forward earlier – but he had no such evidence. There’s little credit to be had for being “right” for the wrong reasons.

  “The DT sting was justified in the MURDOCH interest, but certainly not in the public interest …”

  How could unmasking a Cabinet Minister as flagrantly breaching the convention of Cabinet collective responsibility, not to mention being willing to exercise his ministerial judgement in a matter where he was secretly implacably and irretrievably biased, not be in the public interest?

  “But the biggest piece of Orwellian irony was dumping Cable because he was biased …”

  Why? How, after making the statements he did about NI, could Cable possibly have considered the BSkyB bid impartially and objectively? It’s one thing for a minister to make public statements about how he is inclined to regard a particular matter before a formal decision is made; it is quite another for a minister secretly to harbour an implacable hostility towards an interested party (Cable was ranting on about being “at war” with NI) in a decision in which he is supposed to exercise impartial and objective judgement. This would have been an abuse of his ministerial powers.

  “No credible evidence of wrongdoing at NI? … you can climb the Everest of circumstantial evidence and collaborated statements and that you’ve been trying to not see … Stop deluding yourself … HAVE YOU NEVER READ THE THEIR PAPERS??”

  Cable had no evidence of criminal wrongdoing at NI at the time of the DT sting. Politicians should not be entitled to abuse their positions to wage “war” on every newspaper whose editorial line they happen to disapprove of.

• http://pulse.yahoo.com/_IV7JDGMO7YT3FTKK7ABSJAN2T4 Robbie

  I love the internet.

  “Vince Cable’s dislike of the Murdoch empire was down to his true socialist beliefs”

  The ex Chief Economist for Shell, a ‘true socialist’. Fantastic.

  Rubbish trolling: 1 / 10; must try much, MUCH harder.