What is Vince Cable's 'Plan V'?

 
Vince Cable speaking to the Lib Dem conference

So, what on earth did he mean by that?

Vince Cable's speech to the Lib Dem Conference appeared to back George Osborne's Plan A whilst echoing the warnings of Ed Balls that it is time for a Plan B.

First, the Business Secretary told his party:

"I have great personal sympathy for the Chancellor who is being attacked for borrowing too much, and borrowing too little, at the same time…When we came into government we had to balance competing risks: of aggravating the economic downturn through excessive cuts versus the risk of losing the confidence of lenders. I believe we struck the right balance and adopted a deficit reduction plan. I make no apology for my continued support for that fiscal discipline."

But then he spoke in words that could have been used by Osborne's bitterest political foe, the Shadow Chancellor Ed Balls:

"The need is for a demand stimulus… the country must not get stuck on a downward escalator where slow or no growth means bigger deficits leading to more cuts and even slower growth. That is the way to economic disaster and political oblivion".

How can he believe both things at the same time?

The answer is that he continues to back the government's policy of refusing to borrow more to stimulate demand.

He mocked Ed Balls for talking of a big argument with ministers whilst, in fact, having a policy which is barely different. Cable said that Labour's policy amounted to saying:

"Workers of the world unite. We need a Plan B. We should not cut the deficit in six years but seven".

So if it's not extra borrowing where would the stimulus Cable talks of come from? He didn't say but here's what I sense he means:

- switching government priorities from current day to day spending to capital or investment spending. Standby for the government to curb planned inflation linked rises in benefit rates and to re-direct the money saved

- using the government's balance sheet to underwrite private sector investment - hence his (optimistic?) talk of building an extra 100,000 houses a year

- improving credit conditions via the Funding for Lending scheme. Ministers would like the Bank of England to go further by extending Quantitive Easing so that the Bank buys corporate debt

There will, though, surely have to be more than that to match Vince Cable's rhetoric.

What won't stimulate the economy in the short term is the creation of a Small Business Bank since that will take some time - perhaps 18 months - to set up.

 
Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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  • rate this
    -1

    Comment number 149.

    130. Steve_M-H

    Sick of your arrogance.

    Banks did cause the house price bubble here and in the US. They also supported ridiculous public projects in Spain (and probably elsewhere).

    No need for Gordon to print money when the banks were doing it.

    Govt.s are now printing money to try to stop the bubble from bursting.

    I can't tell you where its going to end.

    Waiting for a grown-up to tell me.

  • rate this
    +1

    Comment number 148.

    Somebody said we could be looking at a lost decade like what Japan suffered. Hate to say it but Vince's plan smells a bit sushi to me!

  • rate this
    0

    Comment number 147.

    #146 and how long b4 that ends up like being lending like spain ?

  • rate this
    0

    Comment number 146.

    Economies grow when people spend, but spend from earnings not from borrowings. So, we need more jobs to create more individual wealth to enable more spending. Hats off to Vince, he wants to provide affordable and long term loan capital to enable the viable businesses to grow and hence create jobs. Elementry dear Watson!
    The LibDems have my vote.

  • rate this
    0

    Comment number 145.

    #144 stalins land grab hhad nothing to do with austerity

  • rate this
    +1

    Comment number 144.

    Hello IR35. You didn't see many facts in my post but at least you saw some. Also ask yourself what economic conditions caused the rise of Hitler and Mussolini? It wasn't growth. As for John Harris66. Yes you're partly right. Ask yourself how do economies grow. Not with austerity. Look at the USA and the the first three years of the recession in the UK.

  • rate this
    +1

    Comment number 143.

    jh@141
    "let's borrow"?

    Or let's unlock vaults, put currency to proper use?

    Equal People, equally empowered, shaping market, by consumption & by choice in their work lives - for value

    All of us economic representatives of each other, those entrusted with investment - & legislation - truly acting for 'one & all'

    Free, would we so much miss Unemployment Pools, Benefit-Traps, Perverse Incentives?

  • rate this
    0

    Comment number 142.

    #140 "Fact - Economies grow when people can spend"

    Let's borrow a trillion then. Simples.

    People spend when economies grow.

  • rate this
    -1

    Comment number 141.

    #140 I did not see many facts in yr post.

    WW2 was not started my austerity .

    Think that was dictators German/italian and Japanesse that want to conquer the world. And also a Russsian state that was on a land grab.

  • rate this
    0

    Comment number 140.

    Well my comment got some reaction. I was called names, deficit-denier, don't know what I'm talking about but no facts. That's what the extreme right do. They concoct names but do not put up any facts to argue their case. Fact - Economies grow when people can spend, Fact - austerity before WW2 led to WW2. This Govt are making the same mistakes as their predecessors. never learn.

  • rate this
    0

    Comment number 139.

    #138 just passed 2 house building extenions in SW london, could not make out a word they said.

    do we really need these forign buildings in the UK, with millions of people on various benifits rather that they did those building jobs, that is the best way to cut the deficit

  • rate this
    0

    Comment number 138.

    133.rockRobin7

    Nobody denying the deficit.

    Just questioning tory policy, which is failing in every way ... even in cutting the deficit.

    I see tory lackies (LibDems) forced to admit situation now so bad that they cannot see an end to the situation - decline justifies cuts, cuts cause more decline, decline forces more cuts.

    What a disaster.

    Tory 'stagnation deniers' need to wake up.

  • rate this
    +2

    Comment number 137.

    I've looked up 'deficit denier' in my dictionary and here's what it says:

    'Someone who pretends our public finances would have been better under what all their rhetoric and policies tell us the Conservative alternative to Labour would have been, i.e. similar public spending plus lower taxes plus even lighter regulation of the finance and property sector.'

    Bang on, my dictionary, as always.

  • rate this
    0

    Comment number 136.

    No135 rockRobin,
    If we were committed to the same level of spending as the previous government would we have had to raise the same amount of tax?

  • rate this
    +2

    Comment number 135.

    so sagamix, Labour are going to pretend they don't need to raise taxes and then raise them? How are they going to present that one? We all know the labour party added over 100 stealth taxes over the course of the boom years. Even higher and higher tax receipts couldn't keep pace with Brown's appetite for creating non jobs. mud sticks.

  • rate this
    0

    Comment number 134.

    128. bkendler
    Only a fool would suggest that G Brown brought about the world recession all by himself, but to say he had nothing what so ever to do with the UK’s fall would be even more foolish.
    You are right to suggest that Thatcherism won’t work in this recession, but since when have the ConDem’s adopted Thatcherism as the answer?
    Different decade - different problems.

  • rate this
    +2

    Comment number 133.

    Oh dear, I see the deficit deniers are out again in force. Let's just hope they continue this line right up unitl the general election in 2015. It's not our fault, honest guv. It was 'the right thing to do' to creat 1 million new public sector jobsworths and increase public sector wages to 7.8% more than the average private sector worker. (ONS) We can afford it now we're printing all this money.

  • rate this
    -2

    Comment number 132.

    'Are Labour really going to head into the next election planning to put up taxes?' - robin @ 96

    **

    No, Robin, read my lips. No party can win a general election unless they pretend to dislike the idea of higher taxes

    Don't suppose the next one will be any different.

  • rate this
    0

    Comment number 131.

    Steve_M-H @116
    "Unfortunately"

    Such a welcome word

    Warming I hope to Robert, as to all here trying to 'educate ourselves'

    Most welcome

  • rate this
    +2

    Comment number 130.

    128

    Leave the politics to the grown ups,will you mate? Theres more than enough Labour activists on here as it is, trying to browbeat the public with their revisionism. Putting it politely, you dont know what you're talking about.

 

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