"I wouldn’t argue that elected mayors present a better model than the traditional local authority cabinet system, but we are practical and if we get more elected mayors we will work with them and compete for them.”

Local enterprise partnerships (LEPs), which involve councils and business leaders, could take on responsibility for some of the policy areas – and spending – currently controlled by Whitehall, he said.

“The LEPs have one great attraction, which is that they are business led. Another could be that they relate more to local areas than the old regional development agencies did.

“They are at early states and some are powering ahead and others less so, but time will tell how effective this is.”

Decentralisation would continue, and the LEPs would play a major role, he said.

“I don’t pretend the changes so far are radical but the intention is decentralisation and I think this will acquire a momentum. What we will see over coming years is the LEPs and alongside it local government exercising more and more responsibility and leadership at a local level, which ultimately is what we need to drive the economy forward.”

Back in 2010, Dr Cable criticised the way LEPs were being introduced as “Maoist and chaotic”. But he said: “I’m much more positive about it than I was when I made that comment.”

One aspect of devolution he appeared far less keen on was the Government’s plan to introduce regional or local pay.

Treasury Minister Chloe Smith recently told the House of Commons that pay levels could vary within regions, so that workers in Birmingham could potentially earn more than those in the Black Country for doing similar jobs.

The thinking behind this is that public sector pay would then match private sector pay more closely, making it easier for private businesses to recruit staff.

But Dr Cable said: “In terms of regional pay, the Government’s overall approach is to try to encourage flexibility.

“But I do recognise the practical problems in the public sector. It isn’t just the political issue – the fear that people will be levelled down in some of the relatively low wage areas – but I think there’s a genuine problem about how you get a career progression structure for a long term public servant. It is very complicated.

“But the Government’s expressed wish is to try to get more flexibility.”

He issued a firm statement of support for High Speed Two, the planned new line from London to Birmingham, which will eventually stretch to Leeds and Manchester. In comments which may go down badly with opponents of the project, he said: “There have been some very voluble criticisms of HS2 and I don’t think it necessarily is the national mood.

“I’d have thought a lot of people are probably rather pleased that the Government is supporting the railways.”

This included schemes such as Crossrail, the £15 billion rail link in London, as well as High Speed Two, he said.

“To see a big expansion of railways I would have thought was very positive, and rather belated in the case of the UK. I think people often miss the central point about it which is that it isn’t just about speed. Okay, you get to Birmingham a bit quicker, that’s not the central issue.

“It’s about increasing capacity, because the system is already very full and this will enable more passengers to be carried in reasonable comfort.”

The Government also wanted to make sure British manufacturers had a fair chance of winning contracts for major capital projects, although there could be no guarantee that High Speed Two trains would be built in the UK, he said.

“We want to try to make sure that in future procurement in the UK is done rather better than it has bene in the last decade or so, when there was quite a lot of very short term thinking.

“And what has been agreed is that we are moving towards a system where the supply chain is given advance notice of new contracts, so they can plan around it, where we have officials in Whitehall who are properly trained in an approach to procurement that takes account of all this.

“But we also recognise that we are in a competitive marketplace, we are subject to European Union rules, we are not protectionist.

“So what I’m talking about it not a black and white change but a shift in the culture around procurement which is more long term and strategic in its thinking.”