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Economists warn on Tory cuts

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More than 50 economists have signed a letter in support of Prime Minister Gordon Brown’s economic proposals and warning Tory cutbacks could tip the country back into recession.

In a letter leaked to The Daily Telegraph, the 58 economists warn that plans by Conservative leader David Cameron (pictured) to £6bn-worth of “efficiency” savings in Government could lead to job losses and “destabilise” the recovery.

Economists Lord Layard, Lord Skidelsky, Lord Peston and Sir David Hendry are among the 58 who signed the letter.

It says: “This cut is described as efficiency savings. But in macroeconomic terms it is just a cut by another name. It will lead directly to job losses and indirectly to further falls in spending through the standard multiplier process.”

“At a time when recovery is delicate it could even affect confidence to the degree that we are tipped back into recession - with much larger job consequences.”

It adds: “This is not the time for such a destabilising action. The recovery is still fragile. Firms and households are saving more to rebuild their balance sheets, so that firms are investing less and households are spending less.”

Meanwhile, the Conservatives say that more than 400 firms back its proposals to stop most of Labour’s National Insurance rises.

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Readers' comments (1)

  • Oh yes, economists - the ones who should have prevented us from getting into this mess in the first place - remind me why we should listen to them.

    As we all know, £6 billion sounds like a lot, but it is a drop in the ocean as a proportion of GDP and the UK's debt burden. Bear in mind that Labour is already planning £15 billion of cuts. Why should another £6 billion make such a difference? It's not much more than a rounding error when you look at the balance sheet of UK plc.

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