Coalition tensions over Britain’s flagging economy were laid bare yesterday as Vince Cable warned that ‘Right-wing nutters’ were threatening a fresh financial meltdown. Official figures out tomorrow are expected to show Britain’s economy stagnated in the second quarter of this year, with growth falling to as little as 0.2 per cent.
In an extraordinary outburst, the Business Secretary accused Republican politicians in the U.S. of sabotaging recovery by opposing tax rises to help cut America’s budget deficit.
Mr Cable told the BBC’s Andrew Marr show: ‘The irony of the situation at the moment is that the biggest threat to the world financial system comes from a few Right-wing nutters in the American Congress rather than the Eurozone.’
The Liberal Democrat’s emotive language comes at a time when the world is in shock at the murderous killing spree in Norway perpetrated by a Right-wing fanatic, and is likely to spark anger in the U.S.
But his questionable choice of words highlighted conflict within the Cabinet over the best way to kick-start the struggling economy.
Chancellor George Osborne has given the strongest hint yet that he wants to scrap the 50p tax rate, while Mr Cable is calling on the Bank of England to start printing money again.
Former Tory Chancellor Kenneth Clarke yesterday described the U.S. debt crisis as ‘the next big iceberg coming towards us’.
Congress has just days to agree a budget deal to begin to tackle America’s debt mountain before the U.S. Treasury runs out of money. Last night American politicians scrambled to reassure global markets the country would avert a debt default, but the two sides gave no sign they were moving closer to a deal.
Republicans have insisted that President Obama agree to deep spending cuts for long-term deficit reduction before they approve any increase in America’s debt burden.
Treasury Secretary Timothy Geithner said it was imperative to construct a deal that will get the country into 2013.
‘It’s unthinkable that this country will not meet its obligations on time,’ he said.
Mr Cable yesterday acknowledged that economic growth was ‘not great’. In a highly unusual move he suggested the independent Bank of England should resume pumping billions of pounds into the economy to prop up flagging consumer confidence.
Many Tories fear the policy of ‘quantitative easing’ – or printing money – will fuel inflation.
Mr Osborne, meanwhile, hinted that he wants to scrap Labour’s controversial 50p tax on people earning more than £150,000 a year to help boost the economy.
The move would provoke an immediate row with the Lib Dems, who believe the top tax rate is an essential symbol that the rich are being asked to do their bit in tackling the deficit.
Mr Osborne insisted the Government would ‘stick to our plan to tackle Britain’s debts’ regardless of the growth figures in order to prevent a Greek-style financial meltdown.
He added: ‘For every pound of regulation and every pound of welfare spending, there’s a pressure group arguing for it.
‘But if we’re going to hold our own against China and India, we’ve got to start to say “no” to things we cannot afford.’
Mr Osborne will today unveil details of the largest-ever trade deal between the UK and India as evidence that the Coalition’s new emphasis on trade is working.
The oil and gas deal involving BP could eventually be worth £12billion.
A survey of 1,800 companies for Lloyds TSB today suggests that prospects for the economy remain ‘fragile’, with the recovery expected to remain ‘sluggish’.
