Cable: Recovery must be balanced

Witney Gazette: Vince Cable insists the economic recovery is "real" Vince Cable insists the economic recovery is "real"

Britain's economic recovery could prove to be a "short term bounce" if it is based on a housing boom, Vince Cable has warned.

The Business Secretary insisted sustained growth depends on rebalancing the economy and preventing a return to "boom and bust".

The comments, during a keynote speech at the Bank of England, are the latest expression of concern from the senior Liberal Democrat over the state of the property market.

He also launched a scathing attack on the Tories, branding their plans for deeper spending cuts after the election "slashing for its own sake", and complaining that the prospect of a referendum on EU membership is undermining business confidence.

Mr Cable said the senior coalition party had already been proved wrong over calls to make it easier for firms to 'hire and fire' workers.

In the address to the Royal Economic Society, Mr Cable argued that a "real recovery is taking place".

"The big question now is whether and how recent growth and optimism can be translated into long term sustainable, balanced, recovery without repeating the mistakes of the past," he said.

"We cannot risk another property-linked boom-bust cycle which has done so much damage before, notably in the financial crash in 2008...

"If the recovery is to be sustained it will need to be balanced, geographically and sectorally, to correct the bias against traded activities and against investment - and to ensure we do not return to boom-bust cycles around property markets.

"Indeed, unless our government put long term rebalancing at the heart of economic decision-making I believe the recovery could prove to be short-lived."

Mr Cable stressed he was "confident" that the government was taking action to ensure the UK has a "sustainable, balanced, long term recovery" rather than a "short term bounce".

He highlighted the joint decision by ministers and the Bank of England to stop backing mortgage lending through the Funding for Lending scheme. The Help to Buy initiative for house purchases championed by David Cameron and Chancellor George Osborne was also receiving "attention", he added.

The Cabinet minister said a building bonanza would be an effective way of controlling prices by matching supply with demand.

"It would be fanciful to expect a re-run of the 1930s in terms of private housing but there is no reason why social housing should not be increasing greatly in scale if - necessarily limited - government subsidy is matched by guarantees for housing associations," he added.

In a series of broadsides at the Tories, Mr Cable accused them of having a "small state agenda".

"Undoubtedly some on the Conservative side of the Coalition see fiscal consolidation as a cover for an ideologically driven, 'small state' agenda," he said. "It is one thing to respond to a record deficit after a long period of rising public spending, as we have since 2010.

"It is quite another to continue cutting hard from a position where the debt burden is falling and when spending has been under pressure for half a decade.

"Some of the proposals to extend deep spending cuts on departments and welfare far into the next parliament have more than a whiff of ideology: slashing for its own sake."

Mr Cable said Britain's debt burden could be reduced after 2015 while at the same time keeping public spending stable.

"The Chancellor by contrast appears to choose cuts of an additional £30 billion over and above those needed to run a structural surplus on the current account of the budget," he said. "It is a case which he is perfectly entitled to make in a party capacity; but let us all be quite clear that this is a political and ideological commitment.

"All parties have a duty to continue to get national debt under control after we have eradicated the current structural deficit, but the Chancellor's plan is not the only one.

"The Liberal Democrats will reduce the debt burden but ensure this isn't done at the expense of public services and the most vulnerable in society."

Turning his fire on Conservatives who urged weaker employment rights to boost the economy, the Lib Dem said: "Britain's already very flexible labour markets have helped to keep employment high and so reassure people about their job security. They are an area of competitive advantage for us.

"A move to a 'hire and fire' culture, as some have advocated, would almost certainly aggravate the immediate problem by engendering fear. That is one of many reasons why I have resisted moves in that direction."

Mr Cable said Mr Cameron's promise of an in-out EU referendum by 2017 had been "deeply unsettling for businesses trading in the European Single Market, from the car industry to financial services".

"The actual risks of leaving may be small but one of the most useful contributions to recovery our coalition partners could make, in the national interest, would be to do more to remove this unnecessary risk," he added.

Mr Cable also took a swipe at Labour, saying Ed Miliband's proposal for freezing energy prices was "a recipe for killing investment".

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