A leading economist has told business leaders they are making a “terrible mistake” in backing drastic spending cuts announced by the coalition government.
The comments from Professor David Blanchflower on BBC Newsnight Scotland came ahead of the UK government's 20 October Comprehensive Spending Review.
Thirty-five business leaders signed a letter to the Daily Telegraph on 19 October urging millionaire Chancellor George Osborne to press ahead with over £80 billion of public spending cuts.
They said that there was “no reason to believe” that the cuts would undermine the economic recovery and that cuts can deliver “a healthier and more stable economy.”
However, Professor Blanchflower described this as "nonsense", and said that they had simply "made up" the key statistic in the letter. He warned that the UK is in “desperate danger” of slipping back into recession.
“They are not economists. It’s a terrible, terrible mistake. The sensible thing to do is to spread the cuts over a long time,” he added on Bloomberg TV.
“Clearly you have to deal with the deficit, but there is no economics that says you have to deal with it in a week or a month. You have to be mindful of the data and if the data turns down, which it has, you have to adapt. The last thing you do in a recession is make things worse,” declared Professor Blanchflower - a leading labour economist who was awarded a CBE last year and who was an external member of the Bank of England's interest rate-setting Monetary Policy Committee (MPC) from June 2006 to June 2009.
Professor Blanchflower also warned that the Bank of England’s additional quantitative easing may not work fast enough to assist the economy.
In their letter to the Telegraph the businessmen said:
“The cost of delay [in reducing the deficit] would result in almost £100 billion of additional national debt by the end of this parliament alone.”
Professor Blanchflower poured scorn on this "made up" statistic.
Among the Telegraph letter’s signatories were Carphone Warehouse chair Charles Dunstone, Ian Livingston, CEO of BT Group, and Sir Christopher Gent, non-executive chair of chemicals giant GlaxoSmithKline.
GlaxoSmithKline was one of three companies named in an investigation by The Guardian newspaper in February 2009 when it was accused of moving its intellectual property rights to tax havens in order to reduce the amount of UK tax they paid.