Question: You've complained about the derisory rates paid on many saving accounts, and there are many saving accounts on offer. Surely therefore it's up to the consumer to shop around and find the best deal?

Vincent Cable: Up to a point that's true. Sure, there has to be competition in the financial services market and banks, and consumers have got to educate themselves to take advantage of good deals, I'd go along with a lot of that.

The problem is that the banking market is not a market in the normal sense and the Cruickshank report which was commissioned by the Chancellor two years ago demonstrated very clearly how it isn't a normal market, because the banks, among other things, are able to control the cheque clearing network which operates on a quasi-monopoly basis. And out of that the key clearing banks derive a certain amount of monopoly power and that was part of the basis for his argument that there are excessive charges within the banking system and the fact that customers were not getting a good deal out of the bank system. And he talked about up to £5 billion excess profits. I don't necessarily go along with that but the argument was very clear.

The second point is if you want to take advantage of good deals in the banking system you have to switch your account from one bank to another, and when you've got standing orders and so on, the mechanics of changing bank accounts to take advantage of good offers is not easy. There's this old joke that people change their banks less often than they change their wives. Statistically apparently that's the case. I know the banks are being pressured into making accounts more portable so that people can take advantage of competition, but it doesn't, at the moment, operate that way.

Question: What action would you like the government to take against these things?

Vincent Cable: Well the specific recommendation of the Cruickshank report was that there needed to be a regulator, which he called Paycom. I won't pretend that as a politician it is my job to intervene. That is why we need a regulation to be independent and operate in much the same way as Ofgen operates in relation to energy, or Oftel operates in relation to the communications, to oversee the banking clearance network and the system of charges associated with it, and to remove the element of monopoly profit.

Question: You say these derisory rates of interest particularly hit people on low incomes. Is there anything you'd want the banks to do for these people on lower incomes in terms of them automatically qualifying for a higher level of interest rates on their savings. Is that a possibility?

Vincent Cable: Well one area where I do agree with the banks is I don't think you can just ask them a favour to perform a charitable function of helping elderly people or poor people. Some of them do it anyway on a pro-bono basis up to a certain point. But if we in Parliament want this objective to be achieved, we have to regulate for it. I tried to introduce into the Financial Services Act when it went through Parliament, a set of social obligations on the banks - that they had a specific legislative responsibility to deal with financial exclusion because a very similar provision was built into the Utilities Bill. Now the government wouldn't take that, and as a result the banks don't have any such obligation.

Question: What sort of obligations would you like them to have?

Vincent Cable: It places an obligation of service on the provider. If you look at water for example the rules were that you don't just automatically disconnect, that the utility has an obligation to its customer. So, had my clause been accepted, what would then have happened would be there would then have to be a piece of secondary legislation setting out a specific set of obligations on banks which could have included a basic simple bank account - and a whole set of principles which they would have been required to follow.

Question: Like what?

Vincent Cable: One of the things would be the way you treat disabled people who can't gain physical access to the bank. I had one classic case which was of a blind woman who had to pay an extremely large fee, in order to prove that her carer was indeed her carer, when in fact it had previously operated on the customer and practice basis. And the set of social principles that I'm suggesting could originally have been incorporated into the legislation, could well have had a provision that banks have to give a particular regard to disablement access, not just physical access but access to the banking network on a reasonable basis.

Question: Do you believe that banks and building societies are finding ways of ripping off customers, or is this just a pursuit of profit?

Vincent Cable: Mutuals of course are in a slightly different category and indeed I was very much involved in a pro-mutuals Save Our Building Societies campaign, because they do operate commercially but they are not so concerned with short term profit in the same way as banks because they are getting returns for their members. One of the things I regret is the loss of much of the building society sector because that provided a better balance within the market.

Looking at the practice of banks, there are some rather obvious things which are, in varying degrees, being dealt with by regulation. A thing which irked me some years ago was the way in which banks often bundled packages together - you got a loan from a bank or building society for a mortgage and it was tied in with a whole set proposals which were profitable to them, like an endowment mortgage, which probably wasn't the best package available, but they were selling you their insurance products and house insurance. Now in recent years it's become more difficult to have bundling and there has been some progress in that respect. But that's a typical example of kind of thing that banks have done in the past and some of them still do - linking some fairly unprofitable line with a profitable line in a way that customers find very difficult to escape from because they haven't got any choice.

Question: The government would argue that they've introduced their rip-off Britain campaign, and their new competition policy which clamps down on unfair competition or unfair pricing. Do you think that's working?

Vincent Cable: Well it's very difficult to understand what's been achieved by the rip-off Britain campaign. It was reduced to ridiculous things like the cost of soft drinks in pubs. They did do some things specifically on car prices although we're yet to see that because the block exemption problem hasn't been fully dealt with yet, but there are one or two areas where they did act. But in the banking sector they have done very little, and this partly comes back to the non-implementation of the Cruickshank report.

Question: Why is that?

Vincent Cable: Well there are two theories. One is the traditional inertia, and I'm told by ministers that they will introduce in due course Paycom. We just have to be a bit patient. But if you're a person of good will and you believe them, well there's nothing sinister about that. There is another slightly more cynical view that the government has been soft peddling on this whole issue because it wants favours from the banks in launching the Universal Bank in order to cope with the problem of pensioners, and in particular benefit recipients in general, will be put onto automatic credit transfer and will have to have a bank account for that purpose. And banks are sort of helping to establish this Universal Bank. The cynical view is that because the banks are helping the government on that, the government is not squeezing them too hard on the regulator, and more generally the government is relying on the banks quite heavily to do things in terms of financial exclusion, I think the government has taken the view it would rather have the banks buying into being socially aware, rather than antagonising them with rather tough regulation.

Question: Which theory do you support?

Vincent Cable: I'm a bit cynical on this. I think the government has pulled its punches.

Question: Where would you like to see them landing their punches?

Vincent Cable: Well I'm hoping within the next year we will get concrete proposals coming forward to establish Paycom, either as a free standing regulator, or within the Office of Fair Trading. It doesn't seem to matter a great deal where it's located, but that would be a real test that the government is serious.

Question: Don't you run the risk of being seen as anti big business?

Vincent Cable: Well I'm not anti big business. I used to work in big business - I worked in Shell and proud that I did so. I'm not anti banks either, it's just that they have in recent years behaved in a rather anti-social way. The whole way in which the bank closure process was handled, particularly by banks like Barclays, showed a complete lack of sensitivity to customers in many cases. And they've got a bad reputation and they deserve it. But I can say that because I'm not anti-capitalist, I'm not anti big business, and I'm not anti bank, but somebody has to say these things.

Question: The Trade and Industry Secretary said she is reviewing the structure of the DTI. You've said Patricia Hewitt should consider scrapping the DTI altogether. Aren't you talking yourself out of a job?

Vincent Cable: I'm sure Charles Kennedy would find me another job. I was speaking slightly tongue in cheek. But I said that for several reasons. First of all, it isn't entirely clear to me what the DTI does that is irreplaceable. Secondly, the existence of the DTI encourages this idea that one of the jobs of government is to bail out bits of British industry that have got into trouble. I think however in practice, that the government has been quite restrained, it hasn't gone as far as the Labour governments in the 70s in providing big cheques for companies in trouble. What would I replace the DTI with? One option would be to recognise the reality that the DTI is in many respects an offshoot of the Treasury.

Question: So you'd extend the Treasury?

Vincent Cable: Well one way of dealing with this would be to split the Treasury in two: to have a bit of a Treasury which is concerned with public spending management, that's really its main job. And then another bit of the Treasury which you could probably say was like the old departments of Economic Affairs in the 60s, concerned with long term supply side improvements of the British economy, and giving the right kind of signals, whether it's in respect of training or infrastructure, long term growth issues.

Question: Both departments run by the Chancellor?

Vincent Cable: Each department would be headed by an independent minister. If the DTI had that function and was very effectively dealing with the long term economic agenda, then I think it would have a real purpose. But I think at the moment it's just a pot pouri of odd things like export promotion, employment regulation, without any sense of coherence.