A hung parliament could actually be good for the UK economy according to Liberal Democrat shadow chancellor Vince Cable. 

 

Speaking at The Economist's CFO Summit, Cable said it might "force politicians to work together in a non-tribal way" – but it will only work if politicians "grow up" and learn to collaborate, he added.

 

"Our political system is in crisis", argued Cable. Parliament is hopelessly over centralised, with no effective scrutiny of public spending, he said, and a "deeply divisive tribal culture" among the leading parties is preventing any real progress towards economic reform.

 

While the current focus is on a heavy programme of cuts across the public sector, the government (and the Conservatives) are missing the point by suggesting that the NHS should be ring-fenced from these cuts. "You can't ring-fence the NHS from spending cuts… Many of the problems relate to the three or four tiers of administration attached to [public sector services] before you even get down to delivery", said Cable. It's these areas that should be cut back – not the frontline services, he argued.

 

Government plans rely on spending cuts to finance 70% of the fiscal correction required to address the deficit, said Cable but other parties put this figure much higher.

 

Empowering local authorities to take control of their spending could be one way of keeping costs down, according to Cable. "Yes, there will always be authorities that abuse such provisions, but on the whole allowing cities to manage their own spending can result in cost savings." Decentralising this process and removing the layers of administration currently in place would deliver these savings, he said.

 

For the next government, the temptation may be to 'take the shortcut' to stemming the deficit by increasing taxes – but this would be a misguided approach said Cable. While a VAT increase seems likely, a rise in income tax would be harder to get support for, he added.