Cable: Brown still in denial over house price bubble

Tuesday, 24 February 2009 09:35

Vince Cable last night claimed Gordon Brown has refused to accept the collapse in house prices was due to an asset bubble.

Speaking at the London School of Economics (LSE) last night, the Liberal Democrat treasury spokesman said: "Until recently Gordon Brown has refused to accept the house price bubble."

Mr Cable explained the Barker Report of 2004 into housing existed to explain the explosion in house prices in terms other than a speculative bubble.

"Gordon Brown and I have had arguments publicly and privately about the housing bubble.

"He could not accept the speculative bubble and still does not accept it," he told the audience.

He also warned about the threat to the economy of toxic debt.

"Three of the biggest banks in the world are British. HSBC is in reasonable shape, RBS is virtually nationalised and with Barclays there are ugly rumours swelling.

"The bad debt will wind up with a bill for the taxpayer, with potential enormous damage to the public sector."

The Liberal Democrat MP also hit out at a new era of protectionism, but said it was right for British banks to increase lending to British firms.

"Should banks lend to British companies or a Russia oligarch? The British taxpayer is underwriting the losses... we have to pick up the public interest."

Mr Cable also admitted there were three major warning signs for the crisis, in a debate entitled 'Why Did Nobody Tell Us? Reporting the Global Crash of 08'

"Firstly ten years ago was the demutualisation of building societies.

"We opposed the Conservative plans. We got it right for the wrong reasons we could have never conceived of the destabilising and the severe consequences."

Secondly he highlighted the Cruickshank Report into competition in the banking industry, which was commissioned by Mr Brown as the then chancellor in 2000, but Mr Cable said it was ignored by the government.

"It looked at the banking and the preoccupation with excessive profits. A key insight that seemed very odd; institutions made profits that could not be explained but with the protection of the taxpayer."

Mr Cable at that point claimed regulation of banks making those of utilities should have taken place.

"The third warning sign was the process of very rapid lending that fed a housing bubble and personal debt."

He also hit out at the "craven creature" of city PR.

"I have been on the receiving end and been invited for friendly chats. The argument was an appeal to me as a patriot to rally round the City as the City drives the UK economy."

Daniel Barnes

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