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DERMOT MURNAGHAN: Now then, around the world financial markets are struggling and have been for some time, with the price of oil and other commodities slumping and there are worries another economic superpower could actually be in deep trouble, not America this time but of course China.  So eight years on now from the crisis of 2008, just how well placed would Britain be to withstand another shock.  In just a moment we’ll be hearing from Sir Vince Cable who was of course the former Business Secretary and the economist, Andrew Sentence but first I’m joined by our Economics Editor, Ed Conway.   Let’s hear from Sir Vince Cable, how worried are you?  How worried should we be about the state of the global economy?

SIR VINCE CABLE: I agree with Andrew that we shouldn’t be getting too excited about short term financial fluctuations but I think there are genuinely deep problems at a global level.  It’s partly the China slowdown, it doesn’t have to be catastrophic but it’s already having massive impacts on other emerging markets, oil exporters.  We have worries about stagnation in the eurozone and Japan and increasingly the United States and the way that Keynes put this 80 or 90 years ago was you have got a lot of savings out there and they are not being absolved in investments and the worry now is that central banks are going to have to resort to even more abnormal policies, maybe even financing government deficits.  I would say that’s possible rather than probable but the fact that we’re looking at those kinds of options is worrying.  For the UK, one area I would disagree with Ed Conway, our financial sector, our banking sector is of course more stable, we’ve got more capital but Britain is much more bank dependent than other major economies.  We still have this phenomenon, these very, very large banks, much larger relative to the economy than Germany, the United States and if something goes wrong in banking we get very badly hit.  

DM: That was something you tried to fix when you were in office.   

SIR VINCE CABLE: Indeed.  

DM: Sir Vince, on the question of fixing the banks, the efforts you made as I said, while you were in office, do you think the Chancellor, now that he is unfettered by you looking over his shoulder, has rather taken their foot off their necks?

SIR VINCE CABLE: I think he has and it does worry me and the arguments we were having a few weeks ago about the relaxation of the regime around financial services and banks in general, do worry me.  We did put through, the coalition did put through and George Osborne and I and others were involved in getting this ring fencing regime established. This is now legislation, it is happening, you could argue it could have gone a bit further but it is happening.  I think the issue we’re probably not focusing on enough is that although there is a lot of excitement about short term financial fluctuations, the problem with the UK is that we still have these very, very deep rooted issues.  We’ve got an economy over-dependent on the property market, we’ve got very weak exports, very low productivity and it’s those long-term fundamentals which of course ultimately affect our living standards and wage growth which we really should be focusing on and I do worry this government has rather taken its eye off that ball.  

DM: Just explain this to our viewers, Sir Vince, as a former economist before you became a politician, on the oil price people are saying for economies like our own, why should the markets be spooked about this low oil price and all the prognostications saying it will stay low for a long time.  Isn’t it overall going to be a good thing for the world economy?

SIR VINCE CABLE: Well the standard economic way of looking at it is to say it is like a giant tax cut, we get the tax cut whenever we go and fill up our cars but I think the worry is that this has happened very, very quickly, it has had a devastating effect on some of the main oil producing economies, some of which could start defaulting on their official debt. It has a severe impact on the oil sector and I don't think anybody believes this is going to continue forever, there will be a bounce back in probably a couple of years’ time and we then may get back into old shot territory.  All this has done is instead of giving us the feeling that we’re enjoying this large tax cut that we can spend, it has just created worry, uncertainty about extreme volatility in a very, very important market and of course much of it is driven by politics and the politics of the Middle East and that is also unsettling.  

DM: Gentlemen, we must end it there, thanks very much indeed for your thoughts, your advice and your analysis, very good to see you all.