Vince Cable warned Britain’s biggest banks on Friday that there was “no way of going back to the status quo”, saying they faced being broken up, tougher lending controls and curbs on bonuses.
In his first newspaper interview since being appointed business secretary, the veteran Liberal Democrat stressed he envisaged a partnership of equals with the Tory chancellor, in bringing Britain’s banks to heel.
“This is a fully joint exercise between myself and George Osborne,” he said. He made it clear he intended to use his influence in the Con-Lib coalition government to impose radical reforms on the way the City operates.
“We’re not going back to business as normal,” he said. “The banking sector is going to have to accept disciplines on the way it operates, regulatory disciplines, and there is going to be a restructuring.”
Mr Cable vowed that the government’s independent review into splitting up the big banks into their retail and higher risk investment arms would result in concrete changes, even if Britain failed to secure international agreement.
“We can’t close down the possibility that unilateral action might have to be taken,” he said.
A central priority of the new government’s plans for securing the “fragile” recovery is to force the banks to lend more to business, Mr Cable said. “The banks are just not performing.”
He admitted this could affect the profitability of the part-nationalised Royal Bank of Scotland and Lloyds Banking Group, hindering the Tories’ plan for a quick sale of the state shares. “That’s why joint working is the only way of dealing with this problem,” he said.
The Liberal Democrat deputy leader’s determination to ensure his party wields influence on the Tory-dominated new administration was also evident on the crucial tax and spending decisions that will be taken in next month’s Budget.
Mr Cable stressed the Lib Dems were “fully signed up” to tackling the £163bn ($237bn) deficit. The Conservatives presented the Lib Dems’ agreement to a net £6bn cut in spending this year as a key concession from the coalition deal. But Mr Cable said the “absolutely crucial” caveat was that some of this £6bn reduction in Whitehall waste would be spent on government employment and training programmes. “So it is no longer £6bn, some will be recycled – obviously we have to discuss how much.”
On his role in helping to persuade his party to ally with its ancient Tory enemy, he said: “We had to operate through our heads rather than our hearts.”
The list of junior ministers in the Con-Lib coalition is expected to include Sir James Sassoon on the Treasury team.
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