Page last updated at 10:31 GMT, Friday, 18 September 2009 11:31 UK

Cable hints at need for tax rises

Vince Cable
Mr Cable said cuts and tax rises should not begin during a recession

Vince Cable has hinted at the need for future tax rises to balance Britain's budget deficit, but said to do so now could deepen the recession.

The Lib Dem Treasury spokesman also warned against immediate spending cuts, saying it could also harm a recovery.

Mr Cable has outlined plans to save £14bn a year in public spending but accepted that was not enough.

"It is eventually going to be a combination of spending and tax measures," he told the BBC.

The Lib Dems have been forced to abandon plans set out by leader Nick Clegg last year to cut overall income tax levels in the light of the recession.

But the party, which meets this weekend in Bournemouth for the start of their annual conference, say they want to cut income tax paid by most workers by £700 a year through higher taxes on big business and the wealthy.

Mr Cable is expected to repeat this pledge to "rebalance" the tax system when he addresses the conference on Tuesday and to outline the areas he believes public spending must be cut.

'Serious proposals'

He told BBC Radio 4's Today programme that while government borrowing was fine in the short term - it could not be sustained for many years.

"The government is going to have to close this enormous gap, something to the order of £80bn to £100bn, that's going to have to be found somewhere," he said.

It is eventually going to be a combination of spending and tax measures
Vince Cable

He has urged politicians to stop talking about "generalities" and put forward "serious proposals" to cut public spending.

He has suggested nine areas where savings could be made - including scrapping Trident nuclear submarines and other big defence projects like tranche three of the Eurofighter aircraft - although they are not yet party policy.

Others including freezing public sector pay, a radical review of public sector pensions and scrapping major IT projects like ID cards and the NHS computer projects.

But he conceded they would only save £14bn and were only a "first cut at the problem".

"This doesn't add up to the full scale of cuts that are required and I fully acknowledge that," he told BBC Radio 4's Today programme.

"It is eventually going to be a combination of spending and tax measures."

You cannot continually spend more than you have and borrow the money
Jonathan Weakley, Barrow

But he also backed the government's argument - disputed by the Conservatives - that cutting spending immediately could put any economic recovery at risk.

"Contracting government spending and increasing taxation at this moment in time runs the risk of getting us into an even deeper recession".

In the Budget the government broke a manifesto pledge not to raise income tax for high earners in this Parliament - by unveiling a new higher 50p tax rate on earnings over £150,000, to be brought in from next April.

The government estimates the higher rate will raise £1.13bn next year although the Institute of Fiscal Studies has questioned that figure.

Figures from the Office for National Statistics on Friday show that UK public sector net borrowing hit £16.1bn in August, taking net borrowing to £65.3bn for the five months of the financial year so far.

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