Cable: House prices will crash

Vince Cable warned the Liberal Democrat conference in Brighton today of a house price crash if Gordon Brown does not curb the excesses in the economy.

The Lib Dem’s economic affairs spokesman said historical trends should teach Mr Brown that every house price boom is followed by a bust.

Mr Cable said: “We can see the frenzied signs of collective madness which always accompany an economic bubble.

“From Dutch tulips to dot.com shares to Japanese land prices, and now UK house prices, we see banks and industrials entrusting their money to a market which seems to offer a one-way bet.”

Mr Cable offered a set of reforms which the Liberal Democrats argue would strengthen the economy.

Appointments to the Bank of England’s monetary policy committee should be independently assessed, while the Bank should also include house prices when measuring inflation.

Fiscal policy should also be put to independent scrutiny, rather than allowing the chancellor to be “judge and jury” of his own policy.

Previewing the Liberal Democrat’s tax polices – where delegates will later this week vote on a 16 pence rate of income tax – Mr Cable said the tax system needs to be made simpler, fairer and greener.

Mr Cable conceded the strong economy had helped Labour win the past three elections, but argued the prime minister’s main weapon was set to become his Achilles Heel.

Massive wealth inequality and reckless lending by banks has made the economy reasonably successful but highly fallible, Mr Cable warned delegates.

He continued: “The House that Gordon built may not be built on sand, but it has certainly been built on a floodplain.

“It has yet to be fully tested against rising economic sea levels, though the events of the last week suggest it may be very soon.”

As the chancellor moves to reassure savers over the Northern Rock turmoil, Mr Cable argued the banks near collapse was an early crack in the economy and blamed greedy executives, indulgent bank regulations and a complacent government for the current situation.

He attacked Gordon Brown for presiding over a widening of the wealth gap while championing social justice.

Mr Cable said: “The seductive narrative of Gordon Brown’s moralistic social democracy also bears little connection to the reality of modern Britain in which amoral and anti-social behaviour by the ‘super rich’ is given free rein; where the poor are hounded for small over payments of benefit and the super rich can pay no tax, where a city is refused a super casino but our country is turned into the world’s super casino for speculative investors.”

Pointing to the “Brown paradox”, he concluded: “No British prime minister since Lloyd George has preached about social justice with such fervour. But Mrs Thatcher’s legacy of income inequality has been respectfully left alone.”