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In keynote speech at Lib Dem conference, business secretary says reduction in inequality is needed to turn economy around as UK faces ‘economic equivalent of war’ Follow all the latest news from the conference on our live blog Vince Cable, the business secretary, has warned that reducing the country’s “appalling inequalities of income and wealth” is essential to turn the British economy around. The Lib Dem cabinet minister said he would “tell it as I see it” as he delivered a gloomy economic forecast, predicting “difficult times” ahead. In a speech that compared the country’s economic crisis to a war situation, Cable said the only way the public would accept continuing austerity was if it is “seen to be fair”. He defended the government’s “tough approach” to deficit reduction as “unavoidable”, but said stability was just one part of getting the economy back on its feet. Stimulus to support growth and “solidarity” to give people a sense of shared society, by reducing the pay and wealth gap and creating “responsible capitalism”, were also needed, he said. “The public will only accept continuing austerity if it is seen to be fair,” he told delegates. “Yet there is currently a great sense of grievance that workers and pensioners are paying the penalty for a crisis they did not create. I want a real sense of solidarity. That does not mean that we go round in blue boiler suits carrying little red books, though I suspect that some on the right believe that is my agenda. It does mean a narrowing of inequalities.” He hailed the party’s commitment to lift low and average earners out of tax, and rounded on those who criticised the Lib Dems’ proposed “mansion tax” – a tax on properties worth over £2m – as an attack on “ordinary middle-class owners”, saying: “You wonder what part of the solar system they live in.” The Lib Dem minister unveiled plans to “call time on payouts for failure” with the launch of a consultation document that outlines plans for greater transparency on boardroom pay and shareholders having a bigger say. “People accept capitalism, but they want responsible capitalism,” he said. “It is hard to explain why shareholders can vote to cut top pay but the managers can ignore the vote. “And surely pay should be transparent, not hidden from shareholders and the public. I want to call time on payouts for failure.” Cable also used his speech to express his “regret” at the government’s failure to secure tighter control on bank pay and bonuses. “A bad message was sent: that unrestrained greed is acceptable. We know where that leads,” he said. But he went on to claim a list of achievements by the Lib Dems in power, including the expansion of apprenticeships and the green investment bank, to reassure those who, like him, had had “mixed feelings” about joining the Conservatives in coalition. Cable harked back to previous coalitions created during the war years to say the crisis facing Britain now was “the economic equivalent of war”. It had been “hard to withstand tribalism”, he said, but insisted that working in partnership during a period of crisis was not treachery but “progress”. He countered critics of the government’s deficit reduction plan by saying financial discipline was not “ideological or rightwing” but a necessary precondition for effective government. Most people understood this, he said, but some on the left and right didn’t. “This is childish fantasy,” he said. Cable also turned on tax exiles and on Conservatives calling for the 50p top rate of tax to be scrapped. “Some believe that if taxes on the wealthy are cut, new revenue will miraculously appear,” he said. “I think their reasoning is this: all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt hole will rush back to pay more tax but at a lower rate. Pull the other one.” He said the Liberal Democrats understood that economic recovery had to go hand in hand with fairness. “The truth is that there are difficult times ahead, that Britain’s postwar pattern of ever-rising living standards has been broken by the financial collapse,” he said. “But we can turn the economy around. In the coalition agreement we promised to put fairness at the heart of all we do as we rebuild our broken economy from the rubble. Liberal Democrats know that you can’t do one without the other.” Cable’s comments on executive pay received a cool reaction from the Institute of Directors. Miles Templeman, IoD director general, said the business secretary should use his speeches to promote the competitiveness of British business, rather than dwelling “for political reasons” on executive pay. “We welcome that the business secretary sees the importance to economic growth of improving the planning regime. We also agree that it is right that the pay of business leaders is aligned to business performance. “Indeed, there may well be some practical improvements that can be made to the way pay levels are set in big companies by improving the performance of remuneration committees. However, it is important that ministers do not politicise a subject that is best approached in a cool, dispassionate way.” Liberal Democrat conference 2011 Vince Cable Economic policy Economic growth (GDP) Economics Equality Executive pay and bonuses Liberal Democrat conference Liberal Democrats Hélène Mulholland guardian.co.uk