Business secretary makes case for spending to boost construction
Business secretary Vince Cable has used an article in the New Statesman to put the case for increased government investment in infrastructure and housing to boost the economy.
The article, which assesses the risks of spooking the markets with increased borrowing against those of failing to stimulate growth, comes ahead of a major speech on the economy by prime minister David Cameron today.
In the piece, seen in the media as an attempt to derail Cameron’s speech, Cable describes giving councils the power to borrow more to finance council housebuilding as a “crucial” response to the current crisis.
He says: “The more controversial question is whether the government should not switch but should borrow more, at current very low interest rates, in order to finance more capital spending: building of schools and colleges; small road and rail projects; more prudential borrowing by councils for housebuilding.
“This last is crucial to reviving an area which led economic recovery in the 1930s but is now severely depressed. Such a programme would inject demand into the weakest sector of our economy – construction – and, at one remove, the manufacturing supply chain (cement, steel). It would target two significant bottlenecks to growth: infrastructure and housing.”
However, Cable concedes it is impossible to predict how the markets would respond to further borrowing to finance these programmes, and that where the balance of risks lay “remains a matter of judgement.”
The article also comes two weeks ahead of the budget, which chancellor George Osborne will deliver on 20 March.