The man who would be king: Cable flirts with Labour

Vince Cable cast himself as the man best placed to make a post-election deal with Labour today, during his conference speech in Brighton.

The business secretary, who was recently revealed to be exchanging text messages with Labour leader Ed Miliband, effectively accepted that the primary problem with the economy was lack of spending power – taking a significant political leap towards Ed Balls' narrative.

"I make no apology for my continued support for that fiscal discipline but right now we are fighting recession," he said.

"The need is for a demand stimulus. That great liberal Keynes had exactly the right analysis of the problem we now have – not enough spending power in the economy."

He added: "We all know we must fight the next general election as a totally independent, national, credible challenger for power.

"I don't believe actually that the British people will want to entrust their future to any one party next time.

"If Britain wants sustainable growth, competence with compassion, fairness with freedom and more equality not ever greater division, then that government must have Liberal Democrats at its heart."

Cable is widely considered the best placed Lib Dem to make a deal with Miliband in the event of a hung parliament in which Labour is the largest party.

Having already made clear he would stand in a leadership election, the business secretary's combination of a Labour-friendly economic assessment and plain-spoken acceptance of the likelihood of another hung parliament suggests he is carefully preparing the ground for when Nick Clegg is forced to fall on his sword.

Elsewhere in the speech, Cable joked about his "good communications with politicians across the political spectrum" and even pretended to reject a call from Miliband, saying: "Not now, Ed."

After the speech, a flurry of support saw bookmakers William Hill cut the odds on Cable becoming the next Lib Dem leader from 7/1 to 4/1.

The business secretary outlined his economic vision as an acceptance that "markets fail" and governments should intervene to "support enterprise".

He added: "Our critics on the right say that all we need is supply side reform to liberate the animal spirits of business.

"Of course we need and value entrepreneurs. But no amount of push from supply side reform can possibly succeed without the pull of demand."

Cable announced a 'British business bank' designed to lend up to £10 billion to struggling small and medium sized businesses.

The project bears an uncanny resemblance to the plan which featured in this week's episode of The Thick of It, where the Lib Dem minister backed £2 billion of funding for a micro-finance initiative, much to the annoyance of his Conservative coalition partner.

Lib Dem sources says they fought hard to get the chancellor to give the green light for the project, which is being funded by  up to £1 billion from departmental 'underspends'.

A further £1 billion is then expected from the private sector with plans to leverage £10 billion on the back of it.

Lib Dems hope the electorate would be more sympathetic to Cable – or party president Tim Farron – in a general election, given they are less closely associated with the coalition that Clegg.

There are other concerns around the business secretary, however. He has been in Cabinet throughout the coalition, even leading the tuition fees bill through parliament.

He is also as old as Ming Campbell when his leadership was stopped short amid whispers about his age.

The new state-backed bank Cable is unveiling will not have branches on the high street, but will instead act as a wholesale institution, using innovative methods such as peer-to-peer lending to keep struggling smaller business going when banks refuse to lend to them.