Coalition business secretary Vince Cable has questioned the nature of the UKís economic recovery, warning that it is possible that it could be short term if it is purely being stimulated by the recent upturn in the property market.
Mr Cable was speaking today in response to the Office for National Statistics annual growth data, which positively showed that GDP had improved by 1.9% over the course of 2013, and 0.7% in the final quarter of last year.
And the Business Secretary called for greater effort to be taken in order to ensure a balanced recovery took place, rather than basing it solely on individual spending and the recent property boom.
“Despite a fall in real earnings, consumers have had the confidence to start spending again – dipping into their savings held for a rainy day and making use of rising house prices, at least in London and the South East, to borrow more easily,” he said.
“Despite these encouraging signs, the shape of the recovery so far has not been all we might have hoped for.”
Despite Mr Cableís caution, he still identified his belief a ëreal recoveryí was currently happening, but called for the government to issue broader policies within the construction and industrial industries as well in order for the economy
to recover in a balanced manner.
“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.
“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 did stress he is “confident” the government is taking action to ensure the UK has a “sustainable, balanced, long term recovery” – rather than a “short-term bounce”.
Mr Cable also expressed his concern about the rapidly rising property prices in the country, and the ease in which people have been acquiring secured loan mortgages though he did not call for any tightening to be implemented.
Mr Cable had previously criticised the governmentís Help to Buy scheme, arguing that it was risking severe damage in London and the South East where people will be affected the most.
And it seems now that Mr Cable will lobby behind closed doors for tighter market controls to be implemented in the
housing sector in a bid to try and prevent a ëhousing bubbleí to occur which would significantly dent the inroads made in the UKís economic recovery thus far.
Sky correspondent Sophy Ridge says: “There will be a few eyes rolling in the Treasury because we do have these positive GDP figures Vince Cable is still sending out a warning that this is not the kind of growth we want.
“To be fair to the Business Secretary though, there are some economists that do agree with him.
“Vince Cable’s concerns are that there is not enough growth in exports, business investment – it’s all based on consumer-driven spending and crucially on a housing boom.”
“He’s concerned that the Government’s Help to Buy policy could essentially cause a housing bubble, which could drive up growth in the short term, but not in the long term.”
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