Sir Vince Cable is a British politician. He was Leader of the Liberal Democrats from 2017 to 2019. He was Member of Parliament for Twickenham from 1997 to 2015 and from 2017 to 2019. He also served in the Cabinet as Secretary of State for Business, Innovation and Skills from 2010 to 2015.
This interview was conducted on 21 December 2021.
Q: You began your work in regional development in Scotland as a Councillor in Glasgow. What was your experience of Scottish regeneration policy from the 1970s?
I was then part of the Labour based group. But I think, with Nationalists too, there was a working assumption that the problems we had – rapid deindustrialisation in the central belt, the relatively low per capita incomes in Scotland – required state intervention on a substantial scale. And the models that people were looking at that stage included these state capitalist-type institutions, and the great belief that government investment both in infrastructure and in long-term financing was essential. This got added momentum following the discovery of Scottish oil and the feeling that there was a resource base therefore to finance this activity.
Some of the institutions that were established at that time – and they’ve gone through various transformations, such as the Scottish Development Agency, which is, I think, now called the Scottish Enterprise Bank – have survived and went through various evolutions. There was a Highlands and Islands Development Board that was then regarded as a considerable success and I think has kept going in different forms. Looking back on it, the institutional models that were adopted have to some extent survived the test of time.
Many of the problems we were trying to deal with remain unsolved. To take a graphic example, I used to represent an area of Glasgow called Maryhill, that was next door to the posh suburbs of Bearsden and Milngavie, which were later represented in Parliament by Jo Swinson. The differential and income in life expectancy and quality of life between these areas, which about half a mile apart, were absolutely staggering five decades ago, and they’re completely unchanged. All of the public investment of a very activist Glasgow City Council…none of these things unfortunately have affected these underlying disparities.
Q: Why have those differences proven so unmovable?
I don’t want to sound fatalistic, but some of them were very, very deep rooted cultural issues, with deprivation being passed on through families. There is some work now going on in England to deal with early years training, before kids get into school and even nursery school, so that problems are not just passed on from one generation to another. But that deep problem, I think, was never really, at least until recently, properly addressed.
There was a belief in my generation that you deal with these problems by building lots of council houses, and that was at one level an improvement. People got proper accommodation rather than bad slum housing. But the problem was more than just bricks and mortar. There were very deep problems which went through history of long-term unemployment, bad health, lack of adequate education, being passed on from one generation to another. And trying to make those deep cultural changes – which are just as impenetrable almost as an issue in Glasgow as they are in Stoke-on-Trent – I don’t think we’ve ever really got a proper handle on that.
Q: Can you provide an overview of the role that you played in the Coalition Government, with respect to regional policy?
In terms of my broad role in policy formation, and the way in which this affected economic policy, this is written up in this book I wrote called After The Storm. I take issue with a lot of the counter-arguments that used to be put forward about the relevance of Keynesian economics in those circumstances. I won’t go into that big picture stuff.
The extent to which I got involved in regional policy issues was partial. When we got into government, one of the first big issues we had to deal with was what to do about the Regional Development Agencies [RDAs], which was the main vehicle the Labour government had used for tackling regional issues. We finished up scrapping all of them. That was a result of essentially an argument I had with [Eric] Pickles, who was in charge of the Department for Communities and Local Government – which provided about 60% of the funding and my department provided 40%. I took the view that some of these institutions were unnecessary, particular in the South East of England, and maybe even East of England.
We were in an environment where we were trying to save money, but we should have concentrated all our resources on the North East, the North West, Yorkshire and the West Midlands. Pickles took the view that the whole lot [of RDAs] should be abolished immediately, that they have no value whatever, which I took some issue with. But then his department were not willing to put in a penny. The whole programme became unviable and my department had the invidious job of trying to wind down the RDAs and their assets. That was one slightly unhappy engagement with these issues.
To follow that up, we set up these institutions called LEPs [Local Enterprise Partnerships], which are largely self-financing groups, mixtures of public servants but mainly business people, which were supposed to raise most of their own capital, after a bit of pump-priming from government.
Some of them have proved to be extremely effective, with get-up-and-go people on their boards. I think Teesside was a very good example. But a lot of them were just completely empty, achieved nothing, and left those areas without any effective leadership.
Later on in the administration, a big new initiative came with Michael Heseltine, if you remember, publishing quite an influential report [No Stone Unturned]. He was a minister who sat in my department as it happened, and this was based on very radical devolution. Partly as a consequence, we have these moves to empower places like Manchester with greater devolved powers. And I think the phrase was ‘negotiated autonomy’. A combination of proactive local initiatives from the more enterprising people like [Sir Howard] Bernstein in Manchester together with Michael Heseltine is how we got into the habit of starting to push decision-making into some of these big city authorities, a process that’s got considerable momentum since.
Q: In the transition from the RDAs to the LEPs, did the goal of regional policy itself change? Or was it simply a case of allocating more scarce resources?
Well, seen from my point of view, it was the latter. I was trying to do a lot with little. But there was an element of ideology in it from the Tory side and Pickles who was a very bluff Yorkshireman. He spoke his mind. He took the view that this whole concept of regional institutions was inappropriate. Didn’t believe in it. His arguments started from the failure of John Prescott’s referendum in the North East. ‘We don’t need regions. We don’t want them. This is breaking up the UK. It’s not the way England should be run.’ Didn’t like regionalism. There was that element of party ideology, if you like, which was adding grist to this mill. He just wanted to close them down. Just didn’t believe in RDAs. Treated them as a waste of money and out-of-touch bureaucratic institutions that have no accountability.
We did need institutional support to level up the North, North West and so on. But that was not accepted. I think we’re basically on the same page in recognising that there are regional inequalities. But of course, they’re much more subtle than that. I come from Yorkshire originally. There are some very prosperous bits of Yorkshire – Harrogate and parts of York where I came from. And there are some very, very deprived bits too. To capture it purely in regional terms doesn’t get the nature of geographical inequalities.
Where I think the Tories were coming from, which is a bit different from Labour, was in breathing life into the mayoral system. They passionately believed in these elected mayor concepts. They hated traditional local government with leaders and so on. They weren’t willing, of course, to reform the local government voting system. Osborne particularly was desperate to get all these mayors elected. I think that was the key driver as much as levelling up or levelling down.
Q: How did you think about the role of London when considering regional policy and decentralisation?
Well, I don’t think the argument was couched in terms of ‘pro- or anti-London’. I think subsequently, with Boris Johnson and company, you’ve got this more populist view about globalisation and the metropolitan elite and all that stuff. That wasn’t part of the belief system when I was around. London was the capital. Osborne had a Cheshire seat, but was very much a Londoner, as was Cameron, in spirit. They revered London, they valued the financial heart of London. There was there was no sense then of London being a problem in the way that it’s currently been interpreted.
Q: Looking back over the past few decades, what do you think are the drivers of regional economic inequalities?
A lot of it has to do with deindustrialisation, and the change in the sectoral balance of the economy. One probably has to start with that. But that’s clearly not the whole story. I mean, the South West of England has some of the lowest paid workers in the country, in bits of Somerset, North Devon as well as up in North Shropshire. Very low paid agriculture, small towns, lack of any real commercial driving force.
Secondly, I think about this whole issue in terms of how cities drive growth, which is a critical issue for the UK. One of the factoids that was stuck in my head was that in Germany, almost every city above a reasonable size threshold has a GDP higher than – and growing more rapidly than – the national average. In the UK, this is true only of London and Bristol. There was something about urban agglomeration and small towns and rural areas lagging behind that.
I think those are the two ways I would be going about it. I think the deindustrialisation issue and the fact that UK cities haven’t sparked productivity growth in the same way they have elsewhere.
Q: How important is devolution in addressing these productivity and cluster problems? Is it a necessary condition?
I found it difficult to imagine how you could make progress without meaningful devolution. I can’t think of any other models around the world where you have a more centralised system than the UK, that you could compare and contrast with. I think the issue is not so much devolution, but what that means: do you entrust local areas, whether they’re metropolitan areas or regions with revenue raising? It struck me that the critical problem here is how do you have meaningful revenue raising – and therefore sense of responsibility at a local level –combined with a redistributive mechanism to ensure that that just doesn’t become virtuous and vicious circles?
I’m not sure which countries have got this absolutely right, but the Germans seem to do pretty well and also the Americans in their very distinctive way. If we really wanted to have a proper experiment, we would be giving the Scots much greater capacity to raise revenue and to borrow. And borrowing is also crucial.
Q: Aside from fiscal powers, what else might work to foster regional growth?
My views did evolve when I was in government, and I was a bit more liberal with a small-L when I went into government than when I came out of it. Things just didn’t happen spontaneously. They needed kickstarting in all kinds of ways. And that’s why towards the end of the government period, I got into the British Business Bank, the Green Bank, the Industrial Strategy, all that stuff – setting up the Catapult network, these catalytic interventionist bodies – because it’s clear that without them, nothing would happen spontaneously.
Q: Have we got the balance right between investing in the Catapult-type schemes, facilitating business launches, and investing in skills, or investing in infrastructure?
We tend to underinvest in all those things. We have this passion, this institutional bias against public investment. It was the battle I was fighting for five years and largely under the radar: a complete unwillingness by the Treasury to tolerate a public investment that produces a return.
There’s an enormous amount of low-hanging fruit in terms of infrastructure and training. In training, we had a good model going, and then they introduced this ridiculous Apprenticeship Levy which has undermined the economics of it. There’s a lot more scope for public investment than we use in the UK and that’s partly why I said, in relation to devolution, you’ve got to allow devolved authorities to borrow against their own balance sheet.
Q: Do you think your department took the same position with respect to public investment? Or do you think there was interdepartmental differences?
I think they did buy into the story I was starting to tell. They were initially very cowed. The department had a rather unhappy history being shuffled around Whitehall with different mandates. I think its status had been considerably enhanced when Mandelson took it over, and I took it over from them. But they have been used to being treated as an offshoot of the Treasury and not having an independent voice.
Q: Did you find that Whitehall spoke with one voice?
The sense of there being a ‘Whitehall and Westminster’ is pretty pervasive, and I think is justified. I think the lack of an alternative view about the economy is very prevalent. This is why I think ultimately the model which we should have in the UK is a bit more like the German system, of a finance ministry and an economics ministry with somewhat different perspectives on the economy.
We’ve never really had that in the UK. The power balance has shifted backwards and forwards, but it’s always been very Treasury-dominated, and that has tended to influence the ‘Whitehall view’. On devolution, I think the instincts are very much to centralise, and it required powerful personalities to change. Heseltine was a good example. He insisted angrily that things should flow the other way, and eventually on some issues got his own way. But it did need a powerful countervailing force, which in my period of government wasn’t there most of the time.
Q: Was the Department for Business, Innovation and Skills pro-devolution institutionally?
No, not really. Partly because there was a genuine sense of pride in some of the things we were doing. A good example would be the work around R&D. Osborne’s view was, ‘all you need to do is really create the right tax incentives and then let the local areas – Manchester Council, whatever it is – get on with it.’ Whereas what we had been doing was a more state entrepreneurial-type of role: the Catapult network. In order for that to be effective, there had to be a national strategic view so that you don’t have centres promoting nanotechnology in seven or eight different places in the UK but you concentrate the resources in one or two places, so it’s more effective.
I think the instincts in this – and I confess that I reinforced it for the reasons I’ve just given – were to try to have a national strategic view about a lot of the things that were happening. Another example would be training: do you have a national apprenticeship model with national system of standards and so on, or do you just let local authorities of local areas get on with it in their own way? We’ve alternated over the last 50 years with centralised and decentralised models without ever having any real clarity.
Q: What would you prioritise for further devolution, if any?
Infrastructure is the obvious one. But that, of course, then creates problems. If you’re talking about the Northern Powerhouse – Manchester or Leeds, and how much do they operate as a cohesive area? Now I’m no longer in government and I no longer have to be protective of what I was doing, I think actually a lot of the skills and even the R&D-type activities could be devolved without too much damage.
Q: What was your view of the capacity of local and regional leaders? Did that vary across the UK?
Well, I think the simple answer is yes. There are some phenomenally good leaders in local government. For obvious reasons, I tended to get to know the Lib Dems – who were initially anyway running Newcastle, Sheffield, and before that Liverpool. There are very high-grade people. They were rather higher-grade people than a lot of people in London. They’d run big operations, £100m plus budgets. They were very smart. And in most cases they weren’t tribal. Tribalism is a big, big problem in local government, but I think that probably relates back to the voting system. You know, Manchester has got 99 Labour, one Lib Dem, no Tory [councillors]. That’s not conducive to a consensual approach to running an area that, to answer the question, had very, very high-grade people. If there’s a fault in what’s happened in Scotland, it is genuinely devolved government, but it is very centralised within Scotland. You see this in all kinds of ways: the way they ran universities, the way they ran the police service and so on. They haven’t carried through the devolution spirit into running Scotland itself.
Q: Early, you described how some LEPs have been more successful than others. What do you think drove this variation?
The stories were very variable. It was partly just chance: you get the right people in the right area. A lot of it was the sheer messiness of British geography, economic geography. I think we spent about three years trying to set up functional Local Enterprise Partnerships around Tyneside because we could never get the council leaders on Tyneside to agree with each other. But further south in Teesside, you have a much more cohesive unit – quite apart from the recent Tory mayor there. Before that, there were some really good, dynamic local leaders; Teesside University; good business people; good people from Middlesbrough Council and so on.
It was very variable. Yorkshire was potentially torn apart, with arguments between Leeds and Bradford and then between Leeds and Sheffield. While Manchester – for reasons I don’t fully understand – and to some extent Liverpool, were very cohesive. They knew what they wanted to do. There was very good local leadership, both in terms of public officials and politicians, and they ran with it. And you’ve had a similar thing more recently in the West Midlands. So unfortunately, and maybe this is just the nature of the beast that when you devolve, you get local entities of different quality. We saw that with the Local Enterprise Partnerships, and it now applies at the level of the much more powerful metropolitan areas.
Q: If you’re trying to get areas to work together, how important is a political accountability structure which stretches across the whole area such as the Greater London Assembly or a devolved parliament?
I think with hindsight we’ve learned that these regional mayors – that initially I was very sceptical about – have developed a political base and some identity. It’s because they are accountable, they are more effective. I think the Tyneside problem was more local tribalism. Newcastle vs Sunderland, Newcastle vs Gateshead. They’re deeply ingrained bits of parochialism. But if you get an overarching body that can bring them together with a powerful personality, a powerful political personality, it does seem to work. I confess that that was probably one area where the Tories were right and I was wrong.
Q: Is it okay to create mayors in a piecemeal way or is that unfair on those areas that get excluded?
It is unfair. We’ve got a very, very messy outcome. I shudder to think of some of the meetings we had in Lancashire where, we had Burnley, Accrington, and rural areas with nothing in common. They found it difficult to talk to each other. I suppose the old Lancashire County Council model probably made sense in that case.
I don’t have a satisfactory answer. It is very messy. I think in a way, the turning point that we missed and could have solved a lot of these problems was the North East referendum. Had that happened and had it come right, you would have had a template for bringing together otherwise fairly incoherent parts of the country. But it didn’t happen. It was rejected, and you’ve been left with a mess ever since and I’m afraid I don’t have any blindingly brilliant ideas about how you retrace that.
Q: Is it important for us to move over time from this piecemeal approach to a standardised model?
It’s a slightly feeble answer, but I think it is how it is. There is some merit in that you are getting a controlled experiment, aren’t you? You know, we’re seeing some things that work and some things that don’t work. And that, in a way, London is a good test bed, because within London you have lots of boroughs, all of which are run by different political parties using different techniques. It’s a very good experiment. You know what works and what doesn’t work. You know because they’re all operating on incredibly strapped budgets. They have had most of their powers taken away from them. The value of that experiment is consequently undermined. So although it is messy, incredibly messy, and very inconsistent and you have gainers and losers and laggards and pioneers, I think one just has to try within that system to have as much financial devolution as possible.
Q: Are there things that the West Midlands or Greater Manchester should learn from the Scottish experience?
Well, I think the one thing to learn from Scottish experience is: it’s fine to pioneer things, but don’t become arrogant with the fact that you’ve got a reasonably competent and interesting Scottish-level set of institutions. That doesn’t mean that Glasgow should have all its initiative crushed, or Aberdeen. You need a degree of devolution within as well as too. That’s the one big thing I think about Scottish experience.
Q: That’s quite a negative lesson. When devolved institutions were founded, the hope was they would be laboratories that the rest of the UK would learn from. Have they fallen short?
I don’t think one should be too negative. I’m now one step removed from the political process. There’s always a feeling when I’m amongst colleagues in Scotland to run down everything the SNP does. But actually some aspects of Scottish government work pretty well, and there is a sense of pride in Scotland. My Scottish relatives, you know, feel Scottish. I’ve got a Scottish son-in-law who works for the SDA and does good work, and his frame of reference is very much around Scottish business. These are intangible things, but they’re not to be rejected.
Q: Have business organisations like the CBI caught up with this too? They seem to find it easier to think about Scotland as unit than the English regions.
That is true. The Chambers of Commerce are much better actually. But again they have this inherent messiness.
Q: What do you think are the most important lessons for regional policy for us to take away?
This is a slightly evasive answer, but there’s no single silver bullet. That’s very clear. You have successes, failures. You have a lot of messiness. I think if you’re trying to deal with inequalities, you’ve got to try and deal with it in those terms: in terms of public spending, taxation, using the education system, the health system. You can’t expect playing around with the structures of local government to deal with that problem. Inequality between individuals or classes is a bigger question, and we shouldn’t be saying it’s a failure of regional policy if we’ve necessarily got more low incomes in one area and high incomes in another. I think the bigger issues are around incentive structures and dependency that require national-level resolution.
Q: Have the reforms since 2010 – LEPs, area-based devolution and city mayors – been a step forward in trying to drive prosperity in the regions?
I think the city mayors have been a step forward. I think the outright abolition of the RDAs was a step backward. I think reform and selectivity would have worked much better and that was a step backwards. I think the elected mayors in general has been a step forward. The LEPs…I was sceptical of them when they started, and I’m not sure they’ve added a great deal. Since then, in many areas, they brought together business people, local officials, universities which are absolutely crucial. I think one of the big insights of recent years has been the recognition that universities, if they are tapped into, can make a big difference at a local level. Places like the University of Wolverhampton, or Teesside, are good examples of universities that have a local focus. They’re not trying to be global universities, they’re just trying to build up their local area, and that’s an important part of the mix.
Q: Should we be seeking, therefore, to have elected mayors across all urban areas?
Yes, I think the key step in your argument is that there’s got to be enthusiasm for it. There’s got to be a drive from below. Somebody sitting in Whitehall saying, ‘There’s a big hole in the map here. Let’s fill it in by setting up some arbitrary authority’ … that just doesn’t work. And there will be some areas that are suboptimal in economic terms. Cornwall is an example, where people have a sense of identity and there are common issues, and you wouldn’t really want to arbitrarily bundle in Cornwall with Devon just for the sake of it. I think that is the answer that you’ve put forward. But recognising that there has to be an element of bottom up here. There has to be a willingness by existing local authorities to work with it.
Q: How should you do it?
A good example of where things can go wrong is around the area I grew up in [York]. There’s a big hole in the middle of Yorkshire. But if you have a Metropolitan Mayor Tracy Brabin and so on in the West and then you have South Yorkshire, what do you do with York and the surrounding rural areas? At the moment, it’s very messy. And somebody in Whitehall came up with the bright idea, ‘Well, why not just abolish York and make it part of East Riding?’ Of course, there was an uprising in the city, ‘This is outrageous. You know we’ve had mayors since 1400’, there’s this stuff. At the end of the day if you finish up with the fairly small authority like York – 200,000 people I don’t know whether that’s small or not – and with North Riding as a separate entity, well that’s much better than trying to spatchcock groups together because it looks neat.
Q: It seems like there is a trade-off there, between an incremental, evolutionary approach and having organisations with enough power and clout to demonstrate their impact, and thereby build legitimacy?
I agree with that, and I think we could certainly argue for a lot more powers. I’d have thought the important question is whether we feel that the most deprived parts of the country – whether it’s Stoke on Trent or some of the small Lancashire towns – have a structure that enables them to go forward.
ENDS