The cuts due to be announced in tomorrow’s Comprehensive Spending Review amount to political cowardice, according to David Blanchflower.
In a report in the Guardian, professor of economics at Dartmouth College and former Bank of England policy maker Blanchflower said the cuts were a surrender in the face of financial crisis.
He said: “Faced with this economic war, this misguided coalition Government has…shown appalling cowardice; rather than fight, Osborne is about to run up the white flag of defeat.”
He adds: “His response is the equivalent of surrendering immediately because of the potential impact of the war on the deficit. It is as ridiculous as that.”
The CSR is expected to set out £80bn in cuts and Blanchflower’s and comments put him at odds with 35 business leaders who in a letter to the Daily Telegraph express support for the cuts.
They include marks and Spencer’s chairman Sir Stuart Rose, Microsoft UK managing director Gordon Frazer and BT chief executive Ian Livingstone.
The letter reads: “In the end the result of delay would be deeper cuts, or further tax rises, in order to pay for the extra debt interest.”
The letter also warns that Labour’s plan to spread deficit reduction over more than one parliament would leave the UK almost £100bn deeper in debt by 2014/15 and raise the risk of interest rate hikes.
Blanchflower rejected this analysis in an interview on Bloomberg TV saying the business leaders were not economists and that the cuts were the greatest macro-economic mistake in a century.
He said: “It is a terrible terrible mistake. The sensible thing to do is spread [the cuts] over a long period of time.”