In his sitting room in Twickenham, Middlesex, a stone's throw from the England rugby stadium, the 69-year-old business secretary insists on perching on a tiny stool with his knees up near his chin, so he can be close to his two inquisitors. His wife, Rachel, suggests that he might like to spend the hour-long interview on the sofa where he had just posed for photos, but he refuses.
It has been a tough week for the government and particularly for ministers in charge of the economy. But at the end of it – and despite the release of some grim manufacturing output figures earlier in the day – Cable is on sprightly form and the atmosphere is utterly relaxed.
Unlike most politicians, he has few airs and graces and rarely resorts to defensive obfuscation. He sees an interview as an exercise in which a journalist puts questions and he answers them. So when asked if Britain's economy might endure a Japanese-style "lost decade", he admits it might well. "There is a real worry about [that], a real risk of that," he says. At every turn he is disarmingly frank. Most ministers would run for safety if asked whether the economy could be heading for a "triple dip" recession but Cable takes the question head on. "Well, there is certainly a risk," he says without the slightest hesitation. "I always try not to get drawn into forecasting arguments [but] there clearly is a risk. The most likely outcome is that we continue bumping along the bottom."
On Wednesday, chancellor George Osborne tried his best in his autumn statement to put a positive gloss on the economic outlook – despite downgrading growth forecasts again, admitting that he would break his "golden rule" on borrowing and announcing that austerity measures would be extended another year to 2018.
Cable instead focuses on what will be a "long hard slog", lasting years, with no guarantee of good times around the corner. Even a return to growth, he warns, will not deliver the feelgood factor that coalition politicians pray will arrive before the next general election. When the economy starts to pick up, interest rates will have to rise. "Interest rates will go back to normal and that will affect a lot of people whose mortgages are hanging by a thread at the moment. Even the recovery is going to be very painful."
As a key player in the cabinet, Cable is fully signed up to the coalition's deficit reduction strategy. He is scornful of Labour for, in his view, not knowing whether it believes government should borrow more or less. What was most surprising about Ed Balls's stumbling response to Osborne last week was that it offered "no economic critique". "He was on pretty good ground when he started talking about the posh boys, and that was hitting close to the mark. But the economic critique was directionless."
Cable is more than willing to create distance between himself and the Tories, to highlight coalition tensions rather than hide them. He believes he did well for his department last week, but is frustrated by the Tories failing to make austerity appear fair to all. He proudly lists achievements en route to creating a full-blown, long-term industrial strategy for Britain. He is pleased with the announcement of a tenfold increase to £250,000 of the tax-free investment allowance for companies. He is proud of the progress he has made with the car industry, the aerospace sector, winning investment for science and the setting up of two banks, the Green Investment Bank and the Business Bank. But he is disappointed at the lack of measures on housing and the absence of a "mansion tax", which would have raised money and, just as importantly, demonstrated that the rich were also being stung.
His message to the Tories is that the coalition will only keep the public on board the austerity rollercoaster if it can show that fairness informs everything it does. "You can persuade the public there's a long hard slog if, first of all, they feel there's a sense of direction, which is why you have to have a strategy for rebalancing the economy, sorting out the banks, getting behind growth industries with an industrial strategy. And secondly, if you can persuade them that it's fair." The fact that David Cameron seems to have opposed a mansion tax because his donors warned him off is a "bad reason" and symptomatic of Tory attitudes at the top, he suggests.
While Cable believes that no responsible government could have avoided measures to slash the welfare budget, he was appalled last week by the way Osborne presented his decision to cap most benefit rises at 1% for the next three years – breaking the link with prices. "I was critical of some of the language that was used to demonise people who are out of work. It is utterly wrong," he says. "Most people are out of work through no fault of their own. The worst thing you can do is insult them."
He is relieved, though, that the Lib Dems saw off other "appalling stuff" proposed by the Conservatives, such as making under-25s ineligible for housing benefit and Iain Duncan Smith's plan to penalise people on benefits who have more than two children. Unlike his Conservative colleagues, he sees no justification for another assault on benefits before or even after the next election. "I think that the Tories haven't learnt their lesson from Michael Howard. You know, 'Are you thinking what we're thinking?' was what he said. It sounds clever but people don't like politicians exploiting that kind of mean streak." He can't understand why the Treasury will not allow councils to borrow more to "build council houses on their own land" and doubts the private sector will be spurred into action by the loosening of planning rules because developers are nervous and people can't find mortgages. "So that's why I would use an old-fashioned public sector solution."
Cable says that no one should be surprised by the weakness of the recovery. "This is the fallout from a very unusual, historically unprecedented type of financial crisis. We don't know much about these strange economic events, because there hasn't been much experience of it – in the UK, anyway," he says. Families, businesses and banks will be scarred for a long time by the downturn. "It's changed the whole psychology of the country in a very difficult way," he says.
Despite the warning from ratings agency Fitch that Osborne's failure to hit his debt target "weakened the credibility" of his plans, Cable is unconcerned about the prospect of Britain losing its AAA credit status. A downgrade is widely expected in the City and would damage the coalition, but government strategists point out that Barack Obama won the presidential election despite surrendering America's cherished top-notch status.
"Other things being equal, it's better to have a AAA rating than not," he says, while pointing out that the borrowing costs of France and the US, both of which have lost their AAA scores in the past two years, have barely budged.
He is much less laid back about the Bank of England's complacency in the face of flatlining growth. Having injected £375bn into the economy through quantitative easing (printing money), he fears the Bank's monetary policy committee (MPC) has hit the pause button.
He is sympathetic to the argument made by Adam Posen, who recently left the MPC, that the Bank should take a more drastic approach – by lending directly to businesses, for example. "We have got to have a very expansionary monetary policy, which we have had until quite recently, but I sense the Bank of England is running out of steam, or perhaps motivation. A lot depends on this new governor." Cable would like to see the Bank given a more explicit target to boost growth, instead of just focusing on inflation – an idea gathering steam among economic commentators. "Every other quango in Britain is now required to have a growth objective," he says.
After an hour, Cable remembers that he has failed to read out a glowing script he had prepared. A piece of paper lies ignored on the floor. "I haven't given you my speech yet on all the wonderful things I've done," he says, before donning a cycle helmet and heading off to a constituency surgery in the freezing cold.
guardian.co.uk © Guardian News and Media Limited 2010
image: © Foreign and Commonwealth Office