Vince Cable urges rethink of George Osborne's flagship 'Help to Buy' scheme

Business Secretary questions whether providing government guarantees for low-deposit mortgages - should go ahead as planned

A fresh Coalition rift on the economy opened on Wednesday after Vince Cable, the Liberal Democrat Business Secretary, warned that a home-buying scheme championed by George Osborne threatened to create a damaging and unsustainable housing bubble.

To the anger of senior Conservatives, he called for a rethink over the Help to Buy initiative as he raised fears that "serious housing inflationary pressures" were developing in parts of the country.

Mr Cable also urged caution over predictions of economic recovery and renewed his criticism of plans by Theresa May, the Home Secretary, to introduce large immigration bonds for visitors from developing countries.

His attack on the housing scheme echoed warnings by influential business groups and the outgoing Governor of the Bank of England that it risks driving up house prices when properties are already over-valued.

Under its second phase, to be launched in January, the taxpayer would guarantee up to 15 per cent of mortgages on homes worth as much as £600,000.

Mr Cable said: "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. We don't want a new housing bubble.

"In many parts of the country it clearly isn't a problem. If you are in Northern Ireland or Wales or indeed the East Midlands you would wonder what all this is about. But certainly in London and the South East, in the north east of Scotland, in other areas, there are serious housing inflationary pressures."

His comments, in an interview with Sky News, were immediately slapped down by Downing Street.

The Prime Minister's official spokesman insisted the scheme would go ahead as planned. He said: "It will be launched. We are faced with a situation - because of the fall in availability of 90 to 95 per cent loan-to-value mortgages - where many first-time buyers are faced with a real obstacle to making a home of their own. It is important we address this."

Senior Tory sources accused Mr Cable of playing to the gallery ahead of the Liberal Democrat conference, which begins on Saturday. They insisted the policy had been carefully designed to avoid stoking up property prices and said people in many regions would be amazed to discover they faced a property bubble.

However, Mr Cable's intervention will carry added weight as he was among the first senior political figures to predict the credit crunch five years ago.

The Office for Budgetary Responsibility and the International Monetary Fund and the Institute of Directors have all signalled their concerns that Help to Buy could prove inflationary.

Lord King, the recently-departed Bank governor, said the initiative was "too close for comfort" to a general guarantee for mortgages and Mark Carney, his successor, has said he would not extend it beyond its planned three-year timespan if threatened economic stability.

Days after Mr Osborne claimed Britain was "turning a corner", Mr Cable spelt out his fears that talk of economic recovery had been over-stated in recent weeks.

The Business Secretary dropped a planned reference to the risk of "complacency" over the economy in a speech to industrialists. But he spoke of the dangers of "letting up" because "we have had a few quarters of good economic data".

Ministers drew comfort from a fall of 24,000 in the headline figure for unemployment, taking the national jobless total to 2.49m, although many parts of the UK recorded lengthening dole queues.

In acrimonious Commons clashes, Ed Miliband, the Labour leader, borrowed Mr Cable's language to accuse David Cameron of "total complacency and total hubris".

The Prime Minister retorted that Labour had been proved wrong in its key economic predictions.

In a further sign the Coalition partners will accentuate their differences during the conference season over the next three weeks, Mr Cable also attacked Conservative plans to force visitors from countries including India and Pakistan to pay £3,000 cash bonds before they can enter Britain.

Although the concept of a bond was originally endorsed by the Lib Dems, Mr Cable said "some of our colleagues in the Coalition interpreted it … in a much more negative way".

He told BBC Radio 4: "In government, I and Nick are arguing for the much more sensible and flexible approach to the bond. The reaction to it from our friends in India and elsewhere, where we are trying to build up relations, was one of outrage."

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
Jamie and Emily Pharro discovering their friend's prank
video
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Our resilience to stress is to a large extent determined by our genes
science
Travel
travel
Arts and Entertainment
tv
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Pornography is more accessible - and harder to avoid - than ever
news... but they still admit watching it
Arts and Entertainment
The eyes have it: Kate Bush
musicKate Bush asks fans not to take photos at London gigs
News
i100
Extras
indybest
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
News
i100
Arts and Entertainment
O'Toole as Cornelius Gallus in ‘Katherine of Alexandria’
filmSadly though, the Lawrence of Arabia star is not around to lend his own critique
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Marketing & Commnunications Executive, London

£30000 - £34000 per annum: Charter Selection: This highly successful organisat...

C# .NET Developer (ASP.NET, JavaScript HTML, CSS) Finance

£60000 - £65000 per annum + Benefits + Bonus: Harrington Starr: C# .NET Develo...

MI Analyst-Reporting-Bank-Edinburgh-£260/day

£230 - £260 per day + competitive: Orgtel: MI Analyst-Reporting-Bank-Edinburgh...

Junior Database developer (SQL, T-SQL, Excel, SSRS, Crystal rep

£25000 - £30000 per annum + bonus+benefits+package: Harrington Starr: Junior D...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment