LONDON (Reuters) - Business minister Vince Cable warned the government against celebrating a return to stronger economic growth on Wednesday, pointing to the risk of a new housing bubble in an economy still recovering from the 2008 credit crisis.
Cable, a member of the Liberal Democrats, has often been a critic inside the government of Chancellor George Osborne, who declared earlier this week that his tough programme of austerity had proven the right course given signs the economy was picking up.
Another round of data backed that up on Wednesday, unemployment dipping to 7.7 percent, but Cable said the economy still needed to be rebalanced towards more exports and investment and away from debt-based consumption.
“The kind of growth we want won’t simply emerge of its own volition. In fact, I see a number of dangers. One is complacency, generated by a few quarters of good economic data,” he told a conference to discuss long-term industrial strategy.
Cable, an economist by education and once a member of the Labour Party, is known for speaking his mind on economic policy and not always in line with party policy.
But the Liberal Democrats are faced with a dilemma ahead of 2015 elections of how they take some credit for any economic recovery while differentiating themselves from Prime Minister David Cameron’s Conservatives.
Cable made his strongest criticisms to date of the government’s housing stimulus scheme in Wednesday’s speech, citing the property market as a possible threat to the recovery and questioning whether the second phase of the programme, due to launch next year, should go ahead as planned.
“We should certainly think about how it should come into effect, indeed whether it should come into effect in the light of changing market conditions,” Cable said. “We don’t want a new housing bubble.”
The second phase of the government’s Help to Buy stimulus programme will provide mortgage guarantees worth 12 billion pounds for buyers without a large deposit.
On Monday Osborne said the plan was a “a sensible, time-limited and necessary financial intervention.”
The Treasury said on Wednesday that the scheme would go ahead as planned.
Editing by Patrick Graham