POLITICS

Vince Cable Undermines 0.7% GDP Growth In Economic Recovery Warning

28/01/2014 09:31 GMT | Updated 28/01/2014 10:59 GMT
ASSOCIATED PRESS
Left to right, British Prime Minister David Cameron, Finance Minister George Osborne and Business Secretary Vince Cable attend a meeting with Indian businessmen in New Delhi, India, Thursday, July 29, 2010. Cameron worked to deepen his nation's ties with India on Thursday, using his trip to the former colony turned rising regional power to rake in millions of dollars in new business for the struggling British economy. (AP Photo/Gurinder Osan)

Vince Cable has broken ranks to warn George Osborne that Britain's economic recovery could prove "short-lived", despite new figures showing that Britain's economy grew 0.7% in the last quarter of 2013.

Speaking on Monday night before the figures were released by the Office of National Statistics, the Liberal Democrat business secretary warned that the "shape of the recovery" has not been "all that we might have hoped for".

The Cabinet minister's message of economic gloom contrasts with the latest ONS figures, which show that the UK's GDP grew by 1.9% in total over 2013, its fastest rate since 2007.

Cable lashed out at the Chancellor's planned pace of spending cuts, branding some of his proposed £30 billion cuts for after 2015 "slashing for its own sake".

"There are different ways of finishing the job … not all require the pace and scale of cuts set out by the chancellor. And they could allow public spending to stabilise or grow in the next parliament, whilst still getting the debt burden down."

"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," he told the Royal Economic Society in a lecture at the Bank of England.

"It is a case which he [Osborne] is perfectly entitled to make in a party capacity; but let us all be quite clear that this is a political and ideological commitment."

The latest GDP news still puts the UK 1.3% below its pre-recession peak, while the US is 5.6% above theirs.

"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."

He added: "Unless our government put long term rebalancing at the heart of economic decision-making I believe the recovery could prove to be short-lived."

Cable's warning comes as Labour shadow chancellor Ed Balls dismissed claims that the UK economy was powering ahead as "cloud cuckoo land".

He told BBC2's Newsnight: "Do you really think up and down the country at the moment when most people are seeing their living standards fall and in most parts of the country there isn't new business investment coming through, do you think that is an economy that is doing really, really well? That is cloud cuckoo land."

"Finally, finally we're getting some growth back in our economy. We're below where we were before the crisis. Even France is above its pre-crisis peak."

In response to the growth figures, Balls said in a statement: "Today’s growth figures are welcome and long overdue after three damaging years of flatlining. But for working people facing a cost-of-living crisis this is still no recovery at all.

"With business investment still weak, construction output down and housing demand outstripping housing supply, this is not yet a recovery that is built to last.

"Risks remain in the global economy and simply to catch up all the lost ground since 2010 we need 1.6 per cent growth each quarter between now and the election."

Jeremy Cook, chief economist at the currency exchange company, World First, said: “Matching Q2’s and Q3’s strength was going to be difficult, but, as the 0.7% number confirms, the UK economy ended 2013 in fine fettle.

“The 0.3% fall in construction output will be a concern, but I would hope that an increased level of investment throughout 2014 should reverse this.

“It’s worth pointing out that these are provisional figures and therefore subject to revision. We could easily see the strong retail sales figure for December moved lower or November's poor construction release upgraded."