UK Politics

Lib Dem conference: Cable's house bubble warning rejected

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Media captionNick Clegg: "We simply don't build enough houses"

Vince Cable's warning about a new housing bubble has been flatly rejected by his Lib Dem cabinet colleagues.

The business secretary has called for a rethink of Chancellor George Osborne's Help to Buy scheme.

He said the plan to allow people to buy homes up to £600,000 on a 5% deposit could create an unsustainable boom.

But party leader Nick Clegg and Treasury Secretary Danny Alexander rejected his fears and said the scheme would go ahead as planned.

The Help to Buy Scheme was the centrepiece of George Osborne's March Budget. It is due to be extended in January to cover more home buyers than those just purchasing a new house or flat.

'Out of control'

Mr Cable has said the government should consider changing the policy or cancelling it "in the light of changing market conditions". Other critics have suggested the scheme could be limited to parts of the country where prices are depressed.

The business secretary said he had no problem with the first phase of the scheme, which provided a government guarantee for mortgages on new homes, but the next phase must be "properly designed".

"We mustn't risk returning to the problems of the last decade when housing got out of control," he told the BBC last month.

But Mr Clegg rejected his warning, saying "We are nowhere near back to that unsustainable housing bubble," and he said ministers and the Bank of England would be "vigilant" to ensure it did not happen again.

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Media captionBusiness Secretary Vince Cable has spoken of his fears about the impact of government policies on the housing market.

He admitted prices in some parts of the country, particularly parts of central London, were starting to look like a bubble but said: "You can not set national policy based only on what happens in Kensington and Chelsea."

He told the BBC's Andrew Marr programme Britain's "housing crisis" was caused by too few new houses, something he claimed the coalition was addressing.

'High prices'

His words were echoed by Mr Osborne's number two at the Treasury, Danny Alexander, who said the concerns of Mr Cable - who represents Twickenham in south-west London - would simply not be recognised across most of the rest of the country.

We are a million miles away form a housing bubble in this country," the Lib Dem MP told Sky News's Murnaghan programme .

"Of course in central London, in Kensington and Chelsea, you see very high house prices but I don't think we should allow the tail of central London to wag the dog of this policy.

"I don't think that we need to rethink this policy, not least because we have always said it's a time-limited policy for three years, after which the Financial Stability Committee of the Bank of England will be able to make a judgment.

"But right now the problem in this country, the problem in my constituency in Inverness or here in Glasgow or across vast swathes of England and Wales is not a housing boom, it is getting construction going, it's getting opportunities for people to own their own home. That's the problem we should be dealing with now."

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