Flatlining economy puts pressure on Coalition partners


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Cabinet tensions are rising over Britain's flatlining economy as ministers brace themselves for weak figures on growth, to be announced tomorrow.

Vince Cable, the Business Secretary, called yesterday for the Bank of England to stimulate growth with a round of "quantitative easing" – printing money, in effect. He backed members of the Bank's Monetary Policy Committee who want another £50bn injection on top of the £200bn already injected.

The Cabinet is sticking to the deep spending cuts announced last year and supports the Chancellor George Osborne's refusal to consider an alternative "Plan B" – a move which would worry the financial markets. Ministers are talking up the idea of a "Plan A-plus" go-for-growth strategy, but the Coalition parties are divided over what it should involve.

Mr Cable, in an unusual intervention, said: "If there is a sustained period of weakness of demand, the right approach to that is not for the Government to relax its fiscal discipline... but it is about the Bank of England pursuing policies of low interest rates – which also help keep our exchange rate down and therefore help exports – but also using expansion of quantitative easing, perhaps in more imaginative ways, not just acquiring government securities."

Mr Osborne favours a different route. He gave a strong hint yesterday he might announce tax cuts for business and individuals this autumn. He prepared the ground for a poor set of growth figures for the second quarter of this year. Some analysts predict 0.2 per cent growth, down from 0.5 per cent in the first quarter.