Get involved: send your pictures, video, news and views by texting BWT to 80360 or you can email us »
Clegg rules out borrowing to spend
Nick Clegg has dismissed the prospects of a borrowing-fuelled capital spending drive after one of his closest colleagues suggested it was time to rethink the Coalition's economic approach.
The Deputy Prime Minister said piling billions of pounds on the Government's debt in a bid to revive the stalled economy would risk pushing up interest rates. The comments came as David Cameron prepared to deliver a pre-Budget speech in which he will vow to stick to the austerity plan that was set out in 2010.
Writing for the New Statesman, Business Secretary Vince Cable said it was time to ask whether "the balance of risk" had changed between deficit reduction and growth. He said the £5 billion infrastructure boost announced last year was a "modest" sum and had so far had "little effect" on domestic demand.
He went on to ask "whether the Government 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 house-building".
He indicated that capital spending, funded by borrowing, may be needed to kick-start growth. Labour said it appeared the Liberal Democrat was "at last seeing sense".
In his regular radio phone-in on LBC 97.3, Mr Clegg confirmed that he, the Prime Minister and Chancellor George Osborne had seen the text before it was published. The Lib Dem leader said he sympathised that the Treasury's investment guarantee schemes seemed to take a "long time" to have an impact - but insisted that no-one thought the Government should borrow "pots of money".
"Everybody agrees with the critical importance of capital investment," Mr Clegg said. "I sign up to very much Vince's frustration at some of the capital investments schemes. They take so long... some of the schemes the Treasury set up they have offered lots of guarantees for infrastructure projects. They do seem to take a long time going.
"The question is not 'Is capital investment a good thing?' I think everyone agrees on that in the Coalition. The question is 'How do you pay for it?'. Vince is not actually saying 'We should borrow pots of money tomorrow'. He is saying this is where the balance of judgment is. This is where we need to balance the risks.
"The question everybody needs to ask - and Vince would be the first to acknowledge this - is that, if you do decide to say to hell with it, let's blow £40 billion, £20 billion, huge amounts of money - because the only point in doing this is if you do it in on a big scale - the risk, of course, and I know Vince acknowledges this, is that unwittingly, of course, you then make it more difficult for everyone else because interest rates might then go up."
Mr Cable played down the idea that his comments represented a shift in policy, telling the BBC: "We just need to pursue what I've often called Plan A-plus. That is financial discipline and getting down the deficit and at the same time pursuing growth. That's what we are doing and will continue to do."