Even by his own standards Vince Cable’s speech today was noticeably pessimistic. The Business Secretary warned that the post-war cycle of ever-rising living standards has been broken by the crash. There was little in what he said to suggest that he has any optimism about the prospects for growth over the next few years.
If Cable’s analysis is correct — and it is shared, at least in part, by several Tory Cabinet ministers — then the politics of the next few years will look very different than we expected. The initial post-election Tory hope of running a ‘It’s morning in Britain again’ campaign in 2015 now seems like a distant memory. This grim economic forecast also has implications for the functioning of the coalition as there will be very few proceeds of growth to share out.
One thing particularly worth noting from Cable’s speech was his call for “the Bank of England to relax monetary policy further linked to small business lending”. This seems to imply that the Bank of England should not only do more QE, but do it in a way that does not involve simply buying government gilts. But, I understand, that Mervyn King remains steadfastly opposed to the Bank buying anything other than government gilts as part of its programme of QE.
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