Economists warn on Tory cuts

15 April 2010 8:32 am | By Leah Milner

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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