Vince Cable, the Business Secretary, faces a new confrontation with Chancellor George Osborne today after warning that Britain could face the “bomb” of a second financial emergency.
The Liberal Democrat Cabinet minister insisted that the country had not faced up to the full extent of the turmoil of the 2008 credit crunch – and said it was impossible to rule out a fresh crisis hitting the economy.
His warning will irritate Mr Osborne who argues Britain is out of the “danger zone” as the country begins to benefit from his tough economic medicine.
In an interview with the New Statesman, Mr Cable said he was worried by the “lack of popular understanding” about the “long-term impact of the collapse of the banking system”.
The Business Secretary cited the warning by the billionaire investor Warren Buffett eight years ago that the complicated financial arrangements of American banks were “time bombs” waiting to explode.
He said: “We really haven't engaged with the real depths and seriousness of the financial crash. You've got bits and pieces of regulation being put in place, but it's very piecemeal. The structure of banks are being addressed in the UK but nowhere else.”
Mr Cable added: “I was very impressed with that Warren Buffett metaphor that asset-backed mortgage lending was the atomic bomb, and that there are hydrogen bombs out there. I just don't think that collectively governments have got to grips with this at all.”
Asked whether another huge bomb could soon go off, he replied: “It’s not imminent. But you can see this happening."
His comments will strike a raw nerve with Tory coalition colleagues as Mr Cable was the first leading British politician to warn of the “unsustainable debt bubble” that burst nearly three years ago.
Earlier this week he was rebuked by Downing Street after suggesting Greece would have to reschedule some of its massive debts. Government sources rapidly distanced themselves from the remarks as it is the practice of ministers not to comment on the eurozone.
Elsewhere in the interview, Mr Cable admitted it was a “serious mistake” for Liberal Democrat MPs, including Nick Clegg, to sign a pre-election promise not to raise university tuition fees.
He quoted a colleague saying the party should be given “eight or nine out of ten for our policies, but one or two for our politics”. Mr Cable added: “I think that’s a fair assessment of how things are.”