Former MPC member believes UK still at risk of double dip

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Professor David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee (MPC), has once again said massive spending cuts introduced to deal with the budget deficit could push the UK back into a recession.

In June, and again last month, Mr Blanchflower warned the coalition Government that tough spending cuts could pose a threat to the fragile recovery and he is not ruling out a double-dip recession.

Today, the Professor said he fears that the first quarter of next year “is really going to look terrible.”

His comments come after an open letter to the Telegraph newspaper showed support for the Coalition Government’s spending cuts.

Chancellor George Osborne’s deficit reduction program met with support from the chiefs of Marks and Spencer, BT, GlaxoSmithKline, Kingfisher and Microsoft UK.

“There is no reason to think that the pace of consolidation envisaged in the budget will undermine the recovery,” it said.

Commenting on the letter, Professor Blanchflower said these business leaders “are not economists. It’s a terrible, terrible mistake. The sensible thing to do is to spread [the cuts] over a long time.”

Chancellor Osborne is set to unveil his Comprehensive Spending Review later this week.

Mr Osborne will provide details of how the Government intends to slash spending by £83 billion by 2014 as it endeavours to bring down the spiralling budget deficit.

Over recent months, many other business experts have been critical of the harsh spending cuts warning that cutting the deficit too quickly could pose a threat to economic recovery.

However, it is inevitable that the cuts will hamper growth and many believe the Bank of England will consider injecting more money into the economy via its quantitative easing (QE) scheme to boost growth as the cuts take effect.

Mr Blanchflower, who is professor of economics at Dartmouth College in the US, received a CBE in the Queen’s Birthday Honours last year after correctly predicting in November 2007 that the UK may face a recession. He also called for interest rate cuts a year before his fellow members on the MPC.

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