The UK is living through an economic crisis “unparalleled in our lifetime”, the Business Secretary Vince Cable said Wednesday as he defended the Government’s strategy to cut the structural deficit by 2015.
He said it was “a reflection of the desperation” many Western countries faced that they were resorting to pumping money into their economies through quantitative easing as he criticised Labour plans to spend money on capital projects to stimulate growth.
The Business Secretary said the only way the Government could support the economy was for the Bank of England to keep interest rates low.
Spending money the country didn’t have would weaken market confidence and lead to soaring interest rates.
Cable told MPs in the House of Commons that the UK’s debt when the coalition took over was only matched by Japan’s as he acknowledged economic growth was slower than ministers would have liked. However, he said, it was necessary to stick to the Government’s plan to eliminate the structural deficit within this parliament.
He said: “Precisely because we have a very large amount of debt in our economy, the priority for Government has to be to preserve an environment where there are low interest rates.”
“We have been able to maintain… through quantitative easing at the Bank of England, now credit easing, and through a competitive exchange rate, a monetary policy that supports growth and supports demand.”
“Given the inheritance we have of massive debits, it is only through monetary policy, relatively low interest rates, that we can possibly support the economy.”
Turning to the new shadow business secretary Chuka Umunna, he added: “I am sure you appreciate that we are living through an economic crisis unparalleled in our lifetimes and that is why not just Britain but the United States and other countries that are having to resort to unorthodox monetary policy.”
“That is a reflection of the desperation of many Western countries but our Bank of England has been comfortable with our fiscal policy and to that extent has been willing to support it through monetary means.”