Why it is absurd for Cameron to claim that he and Cable are united

The PM and the Business Secretary are making diametrically opposed arguments on borrowing for growth.

There is no need to have "a fight" with Vince Cable because there is nothing to have a fight about. That was the argument David Cameron sought to make during the Q&A following his speech on the economy. He pointed out that Cable's New Statesman essay had been signed off by the Treasury (a decision Team Osborne may well now regret) and insisted that the Business Secretary was in full agreement with the government's economic policy. 

But as a close reading of both texts shows, the Prime Minister and the Business Secretary are making diametrically opposed arguments on borrowing for growth. Here are three key points of difference. 

Where Cameron and Cable disagree

1. Would higher borrowing threaten economic stability?

Cameron claimed that deficit-financed stimulus would "jeopardise" the nation’s finances by triggering a spike in interest rates. Cable said the reverse. Highlighting the long-term maturity of the UK's debt, he wrote that "we suffer less from the risks of a debt spiral, where refinancing maturing debt rapidly becomes impossible. Consequently, the effect on our fiscal situation of higher interest rates is in fact nowhere near as bad as having weak growth". 

2. Can borrowing for growth aid deficit reduction?

In his speech, Cameron ridiculed those who think "borrowing more money would mean borrowing less". But in his NS essay, Cable argued that borrowing to invest would not "undermine the central objective of reducing the structural deficit" (a measure that excludes capital spending) and could even assist it "by by reviving growth".

3. Can the government afford to spend more?

Cameron argued that was there no "magic money tree", insisting that the government could not afford to borrow to significantly increase spending. 

It was precisely this kind of economic fatalism that Cable took a razorblade to. He denounced as "absurd" the claim that capital spending could not be "greatly expanded" and attacked the "pessimists" who say "the central government is incapable of mobilising capital investment quickly". 

Borrowing for growth, he added (rather than imposing further cuts elsewhere), "would inject demand into the weakest sector of our economy – construction – and, at one remove, the manufacturing supply chain (cement, steel). It would target two significant bottlenecks to growth: infrastructure and housing."

David Cameron delivers his speech on the economy during a visit to precision grinding engineers Kinetic Landis Ltd on March 7, 2013 in Keighley. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.