“Politicians always seem to assume that the British public isn’t willing to pay more tax in return for better public services,” says Vince Cable. “I’m not entirely sure that’s true.”
The former Lib Dem leader (and business secretary in the 2010-2015 coalition government) has always been regarded as a measured and steady figure in British politics. But in the current context, calling for higher taxes sounds pretty radical.
“You hear this stuff about Britain being an over-taxed country and the highest level of taxation in our history? Well, this is nonsense. The share of tax in our economy is about the OECD average. Well below Scandinavian countries and some others.”
Where was this thinking during his time in government, when the coalition introduced austerity measures so savage that society is still recovering a decade later?
“The financial crisis of 2008 had left a budget deficit that needed to be balanced,” he insists. “We had no choice but to address that. I might have preferred we taxed a little bit more and cut a little bit less – but either way it had to be done.”
Advertising helps fund Big Issue’s mission to end poverty
Advertising helps fund Big Issue’s mission to end poverty
Since then, the UK’s economic strife has been compounded further by the cost of Brexit and Covid and, says Cable, a career economist, we must accept that we are unable to return to our past status as a leading player on the world stage. “We should look at the way in which smaller countries in Scandinavia manage their economies, with higher taxation and stronger public services,” he says.
Meanwhile, the global picture is changing rapidly: in his new book Eclipsing the West, Cable illustrates the unstoppable rise of China and India as economic, political and cultural powerhouses that will dominate the second half of this century. Britain, he argues in the book, has a simple choice: find a way of working with them or suffer further economic decline.
Big Issue: Should we be worried about the rise of China and India?
Vince Cable: I’m concerned that power is gradually shifting away from the western world. But we can also look at both of these new powers as success stories we can learn from. China, albeit within a highly authoritarian system, has proved massively successful in dealing with mass poverty. The history of China, particularly since the Deng revolution after Mao, is phenomenal. Hundreds of millions lifted out of poverty. And the same thing is now happening in India.
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But the human rights situation in China remains pretty dire.
Yes, there was a debate in China a few years ago about whether they could combine their type of government with more liberal social policies, but that has disappeared now. However, there is some diversity of viewpoint and freedom of expression. Online debates are very lively. I mean, it’s not like North Korea; it’s authoritarian, not totalitarian. There is no chance they will embrace western democracy but there is a chance they might explore a slightly more liberal approach. The Singapore model is something that could happen.
Is China a better or worse ally than what we have in Trump’s America?
I wouldn’t say better or worse. What I would argue is that [Britain] needs to hedge our relationships. We shouldn’t do what I think we’ve been doing in recent years, which is trying to shut China out of the UK economy. We should look to work together. We would have to be very careful of course. If you’re supping with the devil you’ve got to sup with a long spoon, but you should sup nonetheless, in my view. And there are a lot of areas, whether it’s AI or pandemics or climate change or nuclear proliferation where, unless we get the cooperation of the Chinese and potentially the Indians we will not be able to make the progress we need to. We need to strike a balance between working with these superpowers and not be consumed by one of them.
Indian prime minister Narendra Modi (front left) with Chinese president Xi Jinping, (front right) at the 16th BRICS summit in Kazan, Russia, on 23 October 2024. Image: PIB/Press Information Bureau/Alamy Live News
How will these superpowers influence environmental matters?
There is a particular paradox here, as both of these countries are among the fastest-growing emitters. China is the largest emitter of greenhouse gases, accounting for approximately 30% of the world’s total emissions. But at the same time, China is now by far, far away ahead of other countries in terms of developing renewable technology. So they’re creating the problem but also solving it simultaneously. And the same is true in India, but India’s starting from further back, and it’s much more dependent on coal for generating electricity. In either China or India, you don’t get any senior leader seriously questioning the validity of global warming. There is a recognition that this is a massive issue. They have the technology and political will to do something about it.
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How will the growth of India and China impact ordinary British people?
We have signed a trade deal with India, which represents a significant achievement in negotiation, but it falls short of compensating for what we lost in Brexit. It doesn’t directly impinge on our living standards. It does so indirectly, as long as these two countries continue to grow economically. They are the locomotives pulling along the world economy, and in a sense we all benefit from that indirectly.
Is the British government too nervous about working closely with China?
There are some government departments that are very keen to build good relations with China, starting with the Treasury and the Department of Education, due to the presence of students and other factors. And there are other bits of government, such as the intelligence service, that are genuinely concerned about cyber attacks. And certainly, there will be some justification. Currently, the main concern is trying not to upset the United States, which sees China as a rival. There are parts of the British government that are very nervous about offending the US administration; a balance of forces exists, and I tend to support people like Rachel Reeves, who simply want to keep the options open for collaborating with Chinese companies on economic grounds.
What can our own government do to stimulate growth?
If you look back over the last 50 years, the underlying growth of productivity in the economy hasn’t really changed much. Britain has some in-built limitations from an economic point of view. And although you can do things in government to try and help, as I tried to do, there’s only so much anyone can do. Therefore, we must be more realistic. In political terms, things that governments have to do are simply not to over-promise. My party over-promised, the Tories over-promised on immigration and Labour have over-promised on growth. It’s much more difficult to bring about change than you realise before you get into power.
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So how do we raise more money for public investment?
It’s a simple proposition to the public: if you want government to spend money, you pay more tax. So I think the challenge for politicians is being honest about that. It’s not just a matter of taxing a few billionaires in the Caribbean, that doesn’t solve the problem. It has to be the whole public willing to spend, preferably according to their means.
Do you think this government can deliver?
I think Rachel Reeves is a clever and competent chancellor. All of that ‘Rachel from accounts’ stuff is pure misogyny. However, she would find it much easier to grow the economy if she had not made all those promises to not raise taxes during the election. British people want to see more investment in public services and most don’t mind the idea of paying a bit more for them. She and [Keir]Starmer are capable politicians but neither of them are particularly good communicators. That is something they can work on.
