Friday, January 15, 2010

Sudden cuts could plunge the economy into a prolonged recession- Cable

Responding to George Osborne's admission that the Conservatives would begin to cut spending immediately after the General Election if they won. Liberal Democrat Shadow Chancellor, Vince Cable said:

"Nobody doubts that serious budget discipline will be required in the coming years in order for Britain to maintain its credit worthiness, but it's foolish to set a political timetable with no regard for the state of the economy.

"There's a big risk that if cuts begin suddenly and on a purely political basis that the economy will be plunged back into prolonged recession.

"What is needed is a set of clear economic tests, which include the growth of the economy and employment, as well as conditions in international markets, to judge when contraction of spending should begin or be accelerated."

Earlier, Vince had commented on evidence given to the Treasury Select Committee today by the Chief Executives of RBS and Lloyds:

“Bankers tell us that their bonuses are a reward for their skills and ingenuity.

“At the moment, this seems to involve borrowing taxpayers’ money at half a percent from the Bank of England and then lending it back to us at eight, 10 or even 20 percent.

“It’s hard to find the skill in that and even harder to see how bankers feel that they have a right to collect bonuses for it.

“This is yet more proof that Labour’s badly designed bonus tax is having no effect on bonus payouts.

“The best way to deal with bonuses and achieve a fair deal for the taxpayer, who guarantee these institutions, is to split the banks up. Before this is done an additional 10% levy on their profits should be introduced.

“This is a much more effective solution than a one-off windfall tax and recognises the debt that the banks owe to the taxpayer.”

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