UK's Cable Sees New Economic Bomb Going Off: Report
The UK has failed to make enough structural changes to its economic model to avoid another financial crisis, Vince Cable, the UK’s Secretary of State for Business, Innovation and Skills told the New Statesman magazine.
His office confirmed to CNBC that the risks of another financial crisis had not disappeared.
“We need to remain vigilant, I have echoed Warren Buffett’s remarks that the economic model, based on a property boom, consumer spending and a focus on financial services has been broken.
The debt- driven model is unsustainable and the risks are still out there, the structural problems are still there,” his office told CNBC.
He told the New Statesman that the UK remained apart from its European neighbors who were managing the global economic slowdown better.
"It is worrying that we are lagging behind Germany and France but I think there are very deep structural reasons for that. They haven’t had a banking collapse; we have," he said.
"We really haven’t engaged with the real depths and seriousness of the financial crisis. You’ve got bits and pieces of regulation out there but it’s very piecemeal. The structure of banks are being addressed in the UK but nowhere else. There is a bit happening in terms of complex derivatives, in terms of clearing house arrangements, though it’s a bit limited," Cable said.
"I was very impressed with the Warren Buffett metaphor that asset-backed mortgage lending was the atomic bomb and that there are hydrogen bombs out there," he added.
His office said Cable’s key concern was the need to keep reducing the deficit.
"The risks are still out there, it’s very serious it has not gone away.” “There is a question mark about whether the regulation is adequate, more transparency is needed and we have the corporate governance consultation ongoing, we need to remain alive to the risks out there," CNBC was told.