September 22, 2010 / 1:43 AM / 9 years ago

Cable criticises capitalism, irks business

LIVERPOOL, England (Reuters) - Business Secretary Vince Cable attacked unfettered capitalism on Wednesday and unveiled plans to review the way companies are governed and how takeovers work, angering business leaders.

Britain's Business Secretary Vince Cable listens to a speech by Deputy Prime Minister Nick Clegg, the leader of the Liberal Democrat Party, at his party's conference in Liverpool, northern England, September 20, 2010. REUTERS/Phil Noble

In a speech to his Liberal Democrat party’s conference, Cable said: “Capitalism takes no prisoners and kills competition where it can.

“Markets are often irrational or rigged. So I am shining a harsh light into the murky world of corporate behaviour.”

Cable, a former economist known for speaking his mind, criticised lavish bank bonuses and broadened his attack on corporate excess in comments which risk alienating parts of the pro-business Conservative party.

The LibDems are junior partners in a Conservative-led coalition government which took office in May and are struggling to assert their own, more centre-left profile.

Cable dismissed concerns that his comments could deter inward investment, saying that he was pro-business but wanted to protect consumers and smaller shareholders and businesses.

“On banks, I make no apology for attacking spivs and gamblers,” he said, saying the country could not afford banks that are too big to fail.

Banks are already facing a separate inquiry into their structure after they had to be bailed out in the credit crisis. Cable and party leader Nick Clegg have floated the idea of using taxes to rein in excessive bank bonuses at a time when the country is facing huge public spending cuts.

However, that has upset figures in the City of London, the heart of Britain’s financial services industry.

“The entire approach is invidious,” said Richard Croker of law firm CMS Cameron McKenna.

“The point here is that bankers may accept one-off bonus taxes as reasonable, but if they became permanent, banks will be compelled to investigate moving overseas — and they won’t be bluffing,” he added.


The review announced by Cable will start in October and examine the economic impact of takeovers, shareholder responsibility, corporate incentives and pay. Cable has noted his limited powers to intervene in takeovers, although aides said he was not necessarily seeking more power for himself.

Critics have cited February’s $18 billion (11 billion pound) takeover of chocolate maker Cadbury by U.S. food group Kraft as a deal driven by investors seeking a quick return.

However, large cross-border mergers are subject to European Union competition rules, and member states’ powers to block them are strictly limited.

Cable’s tone raised hackles in the business world. The Confederation of British Industry, the main employers’ group, accused the minister of using “emotional” language.

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“The case for corporate takeovers is that they allow control of poorly run businesses to pass into more efficient hands,” said CBI director-general Richard Lambert.

“Mr Cable has harsh things to say about the capitalist system: it will be interesting to hear his ideas for an alternative.”

The CBI has backed efforts by Cable to dilute a government cap on immigration which he says is harming business.

Additional reporting by Kirstin Ridley and Avril Ormsby in London; Editing by Paul Taylor

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