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Interview: Vince Cable

The Liberal Democrats’ sound money man

Simon Nixon

Wednesday, 28th November 2007

Simon Nixon talks to Vince Cable, the Lib Dem Treasury spokesman and acting leader, who the City admires as one of the few politicians to talk sense about Northern Rock

Cable is also scathing about another Darling disaster: his cack-handed reform of capital gains tax, which was introduced without consultation and will land many business owners with an 80 per cent hike in their taxes. ‘To craft a strategy for a big important issue on the back of a political manoeuvre [to clobber private equity barons] was wrong.’ But Cable refuses to add his voice to the business campaign against the reform. That might be politically appealing in the short term, but he thinks it would be a mistake. ‘The business lobby seems to be saying, “We’re in favour of tax simplification — but not yet and not if it affects us.” I was opposed from the start to taper relief [the device, introduced by Gordon Brown to encourage new business investment, which enabled private equity investors to pay only 10 per cent tax]. Gordon seemed to think you could manipulate economic behaviour by meddling. But I’ve seen no evidence that taper relief has led to an increase in entrepreneurship.’ Cable would instead restore the system introduced by Nigel Lawson, who he describes as ‘a very good, tax-simplifying Chancellor’. But wouldn’t that be politically suicidal since entrepreneurs would face a 40 per cent tax rate, well above the 18 per cent the Treasury proposes? Cable says the answer is to help small business owners by offering retirement relief and indexation. ‘It’s the lack of either that makes the government’s new system so harsh. Also, it’s important to align CGT and income tax, as Lawson did, otherwise you create opportunities for arbitrage. Labour’s policy is completely unsustainable.’

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