Interview: Nick Clegg

The Lib Dem leader on banks, capitalism and the return of the prince of darkness.

It’s a sign of the times. Last week received a request from Nick Clegg’s office for topics we’d like to cover in our interview with the party leader this Monday. At the time, Americans were feeling queasy over a proposed bank bailout, David Cameron was about to make his conference speech and Peter Mandelson was safely tucked away in Brussels.

By the time Monday comes around the global markets are in freefall after US and European attempts to stabilise them fail to make any appreciable difference. Cameron’s speech has been forgotten and Mr Mandelson is a peer at the heart of British government. Everything moves too quickly now for things written one week to mean anything the next.

In his office, Nick Clegg is checking his watch. The chancellor is about to make a Commons statement. Even media interviews have to move quickly. I ask a very specific question. What would the Liberal Democrats be doing today to save the economy? It doesn’t feel like a day to talk about the past or the future.

Clegg professes to be ahead of the issues. “If you look over the last week, we have been the ahead of the argument at each stage,” he says. “I was the first party leader – it was last Tuesday or Wednesday – to say that whether we liked it or not we would be driven towards offering more ambitious guarantees to depositors.

“At the end of last week we set up some of the ideas that had to be taken up at a European level. Not just the obvious issue about coordinating deposit guarantees but also looking at different models of regulation that work most successfully. Best practise across Europe is something that comes very quickly and naturally to me. I ran European trade negotiating teams with the Russians and the Chinese so I understand exactly how it works.”

To the Liberal Democrats, Gordon Brown’s claims of experience and trustworthiness are increasingly laughable. They point to the Nick Clegg-Vince Cable team as forward thinking unit with both the experience and the insight to navigate the country through what lays ahead.

“It matters enormously that the Liberal Democrats were the only party to say the housing credit boom was unsustainable. It matters enormously that we said there were measures which could have been taken four or five years ago to dampen the bubble in bank loaning,” Clegg says.

I notice he’s gone back to past.

“I’m afraid it’s not possible to start talking about the present or the future without talking about the past,” he replies. “Bubbles are not natural phenomena which you can’t do anything about. Bubbles are part of economic history. But what we know from economic history is that government can do things to dampen down and rein in bubbles. The Liberal Democrats would have taken much more aggressive action much earlier.”

That action, in short, is a revolution in the relationship between government and banks. The current structure needs to be overhauled so the high-risk actions of investment banks are unable to pollute your normal, day-to-day Joe Bloggs banking.

“The relationship between government, regulators and banks has changed forever,” he says. “We will no longer regard banks as just another business, just another commercial sector. It’s clearly an area where you need far more intelligent regulation to ensure that banks don’t gamble with our money.”

It’s not dissimilar to the noises coming from Downing Street. The prime minister has found a new lease of life since the financial situation shifted from gloomy to cataclysmic. Now, New Labour is the party of regulation and a new global economic system. But plenty of onlookers found that a curious message to be broadcasting when you’re moving seasoned free-marketeers like Peter Mandelson into government and, for whatever reason, leaving out veteran left-wingers like backbencher Jon Cruddas. I put that to Clegg, but he looks slightly perplexed.

“I don’t really know what the significance of Peter Mandelson’s appointment is. It’s uh…”

“You seem slightly irritated by the question,” I say.

“No, no, no,” he’s quick to reply. Nick Clegg, by the way, is a Nice Bloke. “I’m not irritated. I’m just not sure it has any bearing on the specific nature of regulation.

“It just seems to me a given that the regulatory environment of the City has to change forever. We now see, more than we’ve ever seen before, that banks are such important lubricants in a modern capitalist system that to simply turn a blind eye – which is effectively what’s happened – and allow them to take huge risks. Well, that can never happen again.”

I say that Mandelson’s introduction doesn’t suggest a leftward shift in government policy, as many of the Labour members hearing Brown’s conference speech could have fairly presumed. As one of the free-market faithful, he seems a curious man to bring into Cabinet as international politics looks in the opposite direction.

“The debate about the market is crucial,” Clegg admits. “You have to decide where the market begins and ends. It’s not ‘are you against markets’. I’m a huge fan of markets, where the markets are competitive. The thing is, you have to decide where markets stop.”

I ask him if he’d describe that as left wing. It’s certainly how it sounds.

“I’ve never viewed it as a debate about free markets and no regulation,” he replies. “All markets exist in regulation, they always have done. A totally free market doesn’t exist. It’s a question of where you regulate and where you regulate heavily.”

That doesn’t quite answer the question, so I ask it again. “Do I think it’s left wing?” he repeats. “I think it’s liberal.”

I suggest that isn’t quite an answer either, but Mr Clegg has to hurry away to the Commons for Alistair Darling’s statement. It’s a sign of the times. Events develop by the second, and change – fundamental economic change – seems to be just around the corner. But however quickly things move, politicians still haven’t lost their aversion to the phrase ‘left wing’. With events moving at their current pace, that could soon change too.

Ian Dunt