Vince Cable calls for relaxation of spending controls
|
Version 0 of 1. Vince Cable has warned that the next government must relax Whitehall spending budgets to support training and infrastructure projects in a move seen as taking the Liberal Democrats closer to Labour before the general election. In a speech in the City, the business secretary attacked the “archaic” way that public spending was controlled, calling for changes to boost areas such as skills training and new rail schemes. Aligning his view of public spending with Labour’s chancellor Ed Balls, he said it was “extraordinary and irrational” that with government borrowing so cheap, there was not more public investment. He told a lord mayor’s dinner at the Mansion House in the City of London on Thursday: “One obstacle is the archaic way we control public spending, which fails to make sufficient distinction between growth-enhancing capital investment and other public spending. “The idea that we should treat borrowing to fund long-term investment as if it was this week’s wage bill makes little sense. One of the most significant commitments the next government should make is to maintain the discipline of deficit reduction, but continue to carve out capital spending in a way that is sensible and economically literate.” He said a way of squaring the circle would be to classify “productive” elements of expenditure as capital spending, rather than as day-to-day spending. The move would reclassify spending on roads and railways and investment in skills and innovation as investment in the “future productive potential of the economy”. Cable believes his pitch for higher capital spending falls somewhere between the Tory straitjacket and Labour’s plan to allow extra capital expenditure within tightly drawn current spending constraints – in line with the coalition’s projections. But Balls has yet to flesh out how much capital spending would be allowed should Labour win office. And Cable’s demand for a broader definition of capital expenditure will distance the Lib Dems from the Tories and align them with the shadow chancellor’s commitment to boost long-term infrastructure budgets. Cable added that business leaders should bring some sanity to the debate over Europe and the threat of a British withdrawal. He said reforming the European Union before a referendum could take years to negotiate, which could hit business investment decisions. Sir Mike Rake, president of the CBI, said pledges to hold a referendum on EU membership and restrict migration were damaging. Rake, who is chairman of BT and deputy chairman of Barclays, said: “Driving growth isn’t about an either/or choice, but about being open to all opportunities, at home and abroad. We need to attract global talent and up-skill our population here in the UK. “We need to embrace the EU’s single market, turning each British customer into seven European ones, and look to new opportunities in emerging markets. “Immigration has been, and will continue to be, part of the solution to our skills shortages whilst net immigration targets will not work.” |