We shouldn't be lecturing euro states, says Cable

Business Secretary hits back at critics, calls for 'humility', and unveils plan to aid school leavers

Britain's double-dip recession means ministers must show "humility" in dealing with the eurozone and not "lecture" countries on how to run their own economies, warned Vince Cable, as he defended his record as a champion of business.

Speaking at the end of a trade visit to Germany, the Business Secretary said he had been struck by the absence of "a sense of crisis", telling cabinet colleagues that hectoring from across the Channel is "badly received and not appropriate".

New figures released last week showed the British economy shrank by 0.3 per cent in the first three months of 2012, worse than first thought. And, at a time when the British economy is in decline, David Cameron's "make up or break up" ultimatum to the eurozone, has come in for criticism. Sir John Holmes, the former British ambassador to France, accused the PM of "irritating" EU leaders with his public interventions.

In a bullish interview with The Independent on Sunday, Mr Cable also dismissed as "ludicrous and fatuous" claims that he is a "socialist" holding back growth, as he prepares to burnish his pro-business credentials by this week offering loans to school leavers to start companies instead of going to university.

Mr Cable told The Independent on Sunday: "It is quite legitimate to point out that, although we are not in the eurozone, we are affected by it, and therefore can reasonably have a view. But I think any sense that Britain is lecturing is badly received and is not appropriate. I certainly approached my visit [to Germany] with some humility, because they are a very successful country and we have got to learn from them. Our credibility rests on how well we do with our economy."

Despite apocalyptic predictions in Britain about the single currency's future, Mr Cable said the Germans "don't feel any need to panic". He said: "There is a 'crisis, what crisis?' mood. Their economy is strong, it is doing very well."

Speaking at the end of a two-day trade visit to Düsseldorf, Mr Cable rejected, out of hand, the idea that he was holding British business back. He said he would not "get embroiled in a punch-up" with his critics, including Adrian Beecroft, the Tory party donor who accused him of blocking job creation, costing the economy £50bn.

Mr Beecroft, who called for "compensated no-fault dismissal" so that bosses could get rid of underperforming staff, last week claimed Mr Cable was "a socialist who found a home in the Lib Dems" and "appears to do very little to support business".

But Mr Cable hit back: "It is absolutely ludicrous... one or two people apparently [have] a political axe to grind. I don't want to get embroiled in a punch-up with them. I am just concentrating on getting on with the job."

Chuka Umunna, Labour's business spokesman, said the Beecroft reforms had been "a shambles and no way to create policy". In an interview with The IoS today, he even appealed to Mr Cable to defect to Labour. "He and I could then work together on an industrial strategy to get the country growing again."

But Mr Cable rejected his critics' arguments, saying he had abolished quangos, swept away red tape and taken a personal lead in securing General Motors' investment of £125m in its Vauxhall plant at Ellesmere Port and Tata Steel's relighting a blast furnace in Teesside. Last week, he published the Enterprise Bill, aimed at helping the 10,000 to 20,000 middle-sized companies whose success will determine the growth of the economy. "To describe this as anti-business is just fatuous," he said.

Mr Cable was forced to defend his credibility at the end of another week of grim economic news for Britain. Heavy April rain helped slash shopper numbers by 13 per cent, year on year; mortgage lending is at a 12-month low; manufacturers report lean order books; and house prices are falling again.

However, the number of new businesses has soared. In April, new start-ups registered with Companies House hit 39,851, up 19 per cent on April 2011. Industry experts say it is a product of recession, with workers made redundant in the struggling labour market opting to set up on their own.

Tomorrow, Mr Cable will launch a £10m scheme offering loans of around £2,500 and mentoring to 18- to 24-year-olds to start their own businesses, arguing: "There is a lot of entrepreneurial spirit in the UK."

Mr Cable said the policy signals a "conscious cultural change" away from Labour's obsession that 50 per cent of school leavers should go to university. Instead, entrepreneurs will be offered loans on the same "principle" as those studying for a degree. "They should be treated on the same footing and we should give comparable support to each."

Mr Cable said that for too long the British economy had "underperformed" because of a "lack of support" for small and medium-sized enterprises. While rejecting Berlin-style business regulation, he said Brit-ish firms – and ministers – can learn from their German counterparts.

He added that despite the Lib Dems falling to their lowest number of council seats since 1986, there was no need for the party to panic. "People are quite angry, and obviously their living standards have fallen because of this crisis, but at the same time I don't think anybody has any real alternatives."

Never mind hectoring the EU, Dave. What about the UK economy?

Double dip Output has dipped for two quarters in a row, meaning that we are now, technically, in a double-dip recession. Neither France nor Germany has fallen into that trap so far.

Youth unemployment Nearly a quarter of 16- to 24-year-olds – around a million people – are not in education and out of work. Last week, International Monetary Fund head Christine Lagarde said this was an issue the UK urgently needs to tackle. In Germany and the Netherlands, less than 10 per cent of youngsters are unemployed.

Disposable income UK households have £144 in discretionary cash – after bills and travel – the lowest level since 2008. You would be better off moving to Luxembourg where the average income per head exceeds $55,000 (£35,000).

Inflation Linked to the fall in disposable income is rising prices. Although UK inflation fell recently to 3 per cent – the lowest in more than two years – the eurozone average is 2.6 per cent.

Retail Sales A sharp slump in petrol sales in April meant retail volumes fell 2.3 per cent, and 1.1 per cent since January. German sales are rising, up 2.3 per cent in real terms in March.

Manufacturing Factory output fell last month and essentially stagnated in the first quarter. Germany's mittelstand of small and medium industrial companies continues to be its bedrock.

Interest rates The Bank of England has held interest rates at a 0.5 per cent, but Ms Lagarde says this must go to zero. At 1 per cent, even the eurozone is a more rewarding place for savers.

Mark Leftly

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