The Liberal Democrats issued a stark warning to homeowners today that the property market bubble is about to burst because of Gordon Brown's failure to control house prices over the past decade.

The warning came from Vince Cable, the party's treasury spokesman and deputy leader, who told the party conference in Brighton that Mr Brown's mismanagement had led to a “collective madness” around house prices which threatened to derail the economy.

“History tells us that bubbles burst - and every housing boom is followed by a crash whatever the papers say,” Mr Cable declared,

His intervention came as thousands queued to withdraw their savings from the troubled Northern Rock bank after a credit crunch blamed on irresponsible lending.

Mr Cable, a former chief economist at Shell, said that the British economy under Mr Brown had been successful but was "highly fallible".

"It has yet to be fully tested against rising economic sea levels, though the events of the last week suggest that it may be very soon," he added. "The water is now pouring through the defences after the near collapse of Northern Rock: a product of greed and reckless gambling by overpaid executives; lax, indulgent bank regulation; and a complacent Government."

Mr Cable laid the blame for the credit crisis squarely at the door of Mr Brown, saying that he had done nothing to prevent the housing market overheating during his 10 years as Chancellor, and now the “chickens were coming home to roost”.

“I deeply distrust the professional optimists - the banks, estate agents, government ministers - who seem to believe in an economic version of levitation,” Mr Cable told delegates.

“This is something Gordon Brown understood ten years ago when he said in his first Budget: ’I will not allow house prices to get out of control and put at risk the sustainability of recovery.’

“But that is exactly what he did. Why? Why did he exclude housing from the measure of inflation? Why did he not give the Bank of England responsibility for this, the most important and destabilising element in inflation? Why has he taken 10 years to produce a housing policy? Why was council and other social housing drastically curtailed forcing families into owner-occupation they cannot afford? Why was he so frightened of tackling the banks over debt promotion, unfair charges and irresponsible lending?

He added: "As long as the boom has gone on, he has been able to avoid answering these questions but his day of reckoning cannot be far off.”

Mr Cable said there was now a widespread belief that the housing market was a “one way bet”, which had led “reckless” banks to lend up to six times people’s income in mortgages.

“We can see the frenzied signs of collective madness which always accompany an economic bubble,” he said. “Until it bursts the bubble has a logic of its own, inflated by uncontrolled credit expansion and rampant speculative demand.”

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