Economists warn over Tory efficiency plans





The Tories want to make savings of £6bn this year

More than 50 economists have reportedly warned that Tory plans for spending cuts risk job losses and tipping the economy back into recession.

The Daily Telegraph says the letter has been signed by Labour peer Lord Layard and Sir David Hendry among others.
Meanwhile the Tories say 415 small and medium firms back its plan to halt most of Labour's National Insurance rises.
The Lib Dems say only they offer a "fair" tax system and have spelled out "honest and detailed" savings plans.
The Telegraph reported that it had seen a leaked letter in which 58 economists, including Lord Layard, Lord Skidelsky, Lord Peston and Sir David Hendry, back Gordon Brown's plans for the recovery - which it said was organised by Labour peers.


'Still fragile'

They said the Tories' proposed £6bn efficiency savings this year are "just a cut by another name".
"This is not the time for such a destabilising action," they add.
"The recovery is still fragile. Only when the recovery is well under way, will it be safe to have extra cuts in government expenditure."

Cutting government waste won't endanger the recovery - but putting up National Insurance will


Signatories to letter backing the Tories

Some of the signatories also signed a letter to the Financial Times in February warning against a rapid reduction in Britain's deficit.
Labour said it showed the Conservatives were looking "increasingly isolated every time they call for immediately cutting support to the economy and putting the recovery at risk".
But the Tories said the leaders of 415 small and medium businesses, from flower shops to small manufacturers, had signed a letter backing their plans to block the bulk of Labour's planned rise in National Insurance.
"We believe that the government's proposal to increase National Insurance, placing an additional tax on jobs, comes at exactly the wrong time in the economic cycle," the letter said.



'Battle of letters'

It added: "Cutting government waste won't endanger the recovery - but putting up National Insurance will."
BBC business correspondent Nils Blythe said it was the latest in the "battle of the letters" which began in February when a group of economists wrote to the Sunday Times supporting the Conservatives' approach. That was followed by the letter to the FT by another group of economists backing Labour.
He said the Tories' support from business leaders, including the bosses of Marks and Spencer and Next, probably had a bigger impact on the debate because they were better known among the general public.
The row over Labour and the Conservatives plans for tax and spending dominated the first week of the election campaign.
Labour plans to raise National Insurance by 1% for people earning more than £20,000 from April next year - which the party says is necessary to protect spending on health, policing and education.
But the Tories say it would be a "tax on jobs" that would "kill the recovery" - and have pledged to block the bulk of the rise by saving £6bn cutting "wasteful" government spending.
They have been backed by more than 80 business leaders but Gordon Brown and Chancellor Alistair Darling have said the plans are based on "back-of-the-envelope" calculations are are "reckless".
The UK economy exited recession in the last quarter of 2009 when it grew 0.4%.



http://news.bbc.co.uk/1/hi/uk_politi...10/8621273.stm