Ministers should abandon controls on capital spending and let local authorities take advantage of low interest rates to invest in housing, according to Liberal Democrat leader Sir Vince Cable.
In an exclusive and wide-ranging interview with The MJ this week, just before the start of his party’s annual conference, Sir Vince aired his views about social care, business rates, housing, devolution and spending.
Speaking in his Commons office, Sir Vince, who won back his Twickenham seat in the General Election and was subsequently elected leader in July, said local government would be where his party’s fightback would begin. ‘You can’t grow a tree without roots and our councillors are the roots,’ he said.
The party has 12 MPs but 1,820 councillors. He said the party was ‘back on an upward trajectory after several torrid years’ and added: ‘The first area in terms of recovery is local government, where we’ve got a good base and we’ve a good chance of winning back my own council, Richmond upon Thames, as well as Kingston next year. Traditionally we’re the party of local government.’
He admitted that being part of the coalition, in which he was business secretary from 2010 to 2015, decimated his party’s base. ‘A lot of councillors took a terrible hammering and lost their seats. We had a torrid time in the northern cities though we have a solid core in some places like Hull [where it has 17 out of 59 members].’
Ironically, it was Brexit, to which he is bitterly opposed, that gave him the opportunity to stand again for Twickenham when Theresa May called the snap election for June. With the Conservatives heading right and Labour left, the Lib Dems should have been well placed to fill the vacated centre, but their result was disappointing. Sir Vince explained that ‘the basic Brexit message didn’t play for us. It was bad timing. A lot of Remain voters backed Labour under the mistaken apprehension they were voting for a Remain party. When politics are polarised the electorate becomes frightened and it becomes difficult for a middle of the road party.’
Asked whether austerity was now dead, he replied: ‘I never accepted the binary choice between austerity and non-austerity. It’s a question of more or less, not yes or no.’
In the early years of the coalition capital spending took a hit. His big criticism is infrastructure spending continues to lag. ‘The big failure was unwillingness to engage in capital spending for both central and local government. The cost of borrowing is low. We’re missing a major opportunity to rebuild our infrastructure, both locally and centrally. The Treasury should distinguish between current and capital spending. The difference has been blurred out of existence. Lots of smaller projects, especially in the North, just aren’t getting off the ground.’
He is also critical of the Government’s regional policy. ‘The Northern Powerhouse has lost political momentum. Devolution is also happening in an uneven way. Some areas are effective, others aren’t progressing. Manchester and places like Birmingham are happening but the North East is a disaster area. Insisting on an elected mayor as a pre-condition wasn’t sensible. We’d have got further without insisting on elected mayors.’
Looking back on his time in government he now admits that abolishing the regional development agencies (RDA) was done too crudely. ‘The mistake we made in the coalition was over the abolition of the RDAs. Getting rid of the RDAs was right in principle but done in a Maoist way. It would have helped the North East if we’d kept its RDA. Local Enterprise Partnerships have been uneven.’
Sir Vince backs the principle of retaining business rate but believes that ‘it isn’t a long-term solution.’ He added: ‘The problems with business rate are twofold; the Government made a mess of the recent revaluation with relief not being paid through no fault of councils. Also business rate isn’t a very good system. It taxes improvement. The Government should bite the bullet on corporation tax and look at taxing turnover.’
He admits the difficulty of reforming the local tax system, recalling a conversation with George Osborne when the latter was chancellor. ‘[Osborne] made a point that it was like driving into a yellow junction box and getting stuck. You need to know the exit before you go into it.’ However he is ‘very conscious local government took a big hit’ from spending cuts and ‘should get more financial freedom and be able to set its own tax rates’.
The party’s election manifesto on health and care funding was to put 1p on income tax. Sir Vince described this as ‘a contribution’ but added: ‘In the long run it’s not a solution and we need a predictable funding stream for health and care. My local hospital for example has a big issue with bed blocking.
‘On the issue of social care we’d actually reached agreement with the Dilnot report, which had cross-party consensus. We’d agreed in principle on a cap of £70,000, then the government reopened the issue in the middle of the election campaign. There’s no common ground now. Dilnot is the best solution so the Government should just get on with it.’
On housing he is virulently opposed to the Help to Buy scheme which offers a government interest-free loan of up to 20% for buyers of new houses. He says: ‘Help to Buy is a truly terrible idea. All it’s done is pump up house prices. The beneficiaries are the builders. It’s done nothing to get people into owner occupation. It’s a terrible waste of government money that should have been put into supply, not creating more demand.’
He believes the government should let councils borrow for housing saying: ‘Councils should be able to build more houses. It’s scandalous they can borrow for commercial development even if it’s not in their area, whereas they’re seriously constrained on housebuilding.’ He added: ‘I don’t have a dogmatic view on tenure providing it’s affordable. There shouldn’t be a taboo on council housing.’