David Cameron and Vince Cable at war over route to recovery

Business Secretary calls for more borrowing as PM insists there must be no turning back on austerity

Tensions inside the Coalition over whether the Government should change economic course will burst into the open today when Vince Cable calls for higher borrowing to finance large-scale building projects to kick-start the economy.

The Liberal Democrat Business Secretary, who wants more housing, schools and colleges to be built and more road and rail projects, will argue that the “modest” £5bn increase in capital spending announced by George Osborne last December was not enough and has had “little effect on demand”. Mr Cable will suggest higher borrowing, the course advocated by Labour, would not spook the financial markets as the Conservatives claim.

Mr Cable’s most significant departure yet from the Coalition’s stance will directly contradict a speech by David Cameron today claiming that the economic medicine is working and that he will stick to the course. The Prime Minister’s case will be strengthened by an announcement that BT is creating more than 1,000 jobs in its Openreach business. Most of the new recruits will install fibre broadband in homes.

Writing in today’s New Statesman magazine, Mr Cable proposes “greatly expanded” capital spending. While insisting the Coalition’s cuts programme was right in 2010, he suggests the “balance of risks” may now have changed. “[There] was good reason to worry that the UK, as the country arguably most damaged by the banking crisis and with the largest fiscal deficit in the G20, could lose the confidence of creditors without a credible plan for deficit reduction, including an early demonstration of commitment... Almost three years later, the question is whether the balance of risks has changed.”

The Business Secretary claims borrowing for growth “would not undermine the central objective of reducing the structural deficit” and may even “assist it by reviving growth”. He recalls that the International Monetary Fund argued last year that the risk of “losing market confidence” as a result of higher borrowing is now outweighed by “the risk of public finances deteriorating as a consequence of continued lack of growth”.

Setting the scene for a “no U-turns” Budget in two weeks, Mr Cameron will say in Yorkshire that the “signs of progress are just the beginning of a long hard road to a better Britain”. He will argue: “The very moment when we’re just getting some signs that we can turn our economy round and make our country a success is the moment to hold firm to the path we have set. While some would falter and plunge us back into the abyss, we will stick to the course.”

Mr Cameron will say: “We want to look after people in their old age – and we won’t be able to do that if we’re squandering billions on welfare for people who could work. We want to help people into work and break the cycle of poverty – and we’ve seen that ever-increasing working-age welfare isn’t the answer. We want to help with the cost of living, and that means cutting spending to keep taxes down.”

Chris Leslie, Labour’s Treasury spokesman, said: “Vince Cable may at last be seeing sense. He is right to admit there have been economic consequences to deep cuts to capital investment. But he has consistently supported a failing economic policy which has led to stagnation, falling living standards, slashed investment in infrastructure and rising borrowing to pay for the costs of economic failure.”

* Civil servants will stage a strike on Budget day, 20 March, to launch three months of industrial action in a dispute over pay, pensions and working conditions. The Public and Commercial Services Union said almost 250,000 workers will take part in a series of walkouts and protests.

Osborne's limited budget options

Child care

Long-awaited plan to make child care more affordable still being negotiated inside Coalition. Could include tax breaks and more “free” hours of care.

Likelihood (out of 5): ££££


Coalition parties are wrangling over plans to extend help for home-buyers and a possible boost to housebuilding

Likelihood: ££££


Chancellor is set to announce another boost to major building projects to boost growth - but many previously announced schemes  are still stuck in the pipeline. Unlikely to back Vince Cable's call for them to be financed by higher borrowing

Likelihood: ££££

Fuel duty

Mr Osborne, who cancelled  a 3p a litre rise in fuel duty due in January, is likely to bow to growing pressure from Conservative MPs  to delay another increase due in September to help families struggling with the cost of living

Likelihood: £££

More tax cuts

Mr Osborne is likely to announce  some tax cuts for business but may disappoint Tory MPs clamouring for lower taxes for individuals to kickstart economic growth

Likelihood: £

More spending cuts

Tory MPs want to see another assault on the welfare budget to create room for tax cuts. But Chancellor is already struggling to persuade Cabinet ministers to find the £10bn of cuts he has pencilled in for 2015-16

Likelihood: £

Have you tried new the Independent Digital Edition apps?
ebooksAn unforgettable anthology of contemporary reportage
Teeth should be brushed twice a day to prevent tooth decay
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
Those who were encouraged to walk in a happy manner remembered less negative words
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
Renee Zellweger as Bridget Jones
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

IT Project Manager

Competitive: Clearwater People Solutions Ltd: Our client based in Chelmsford a...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

IT Manager

£40000 - £45000 per annum + pension, healthcare,25 days: Ashdown Group: An est...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London