The state of the economy and property market is a 'national emergency', and measures such as the removal of empty property rates relief will only make things worse, according to Liberal Democrat deputy leader and shadow chancellor.

Speaking at a Movers and Shakers event at the Cafe Royal, Cable said he saw two possible scenarios for the economy going forward: either a short, but severe, downturn, with recovery in the next 18 months, or a more protracted recession resembling what happened in Japan in the 90s.

Cable said: 'We are in a national emergency. Britain's banks came within 48, maybe 24, hours of collapse.'

He said commercial property was also suffering from falling values, and joined the Conservatives in condemning the 'double whammy' of the removal of empty rates relief, and Gordo Brown's half-hearted reform of the tax in last month's pre-budget report.

He said: 'Emty rates is a bad policy doing a lot of harm. The concession made by Brown is so small as to make no difference.'

He also said the government needed to take steps to get the housing market back on its feet.