I said yesterday that I suspected the business leaders who had written to The Telegraph insisting that Osborne must stick to his guns regarding the Tory planned cuts would turn out to be Tory supporters.
The 35 businessmen warned against delaying cuts in a letter to the Conservative-supporting Daily Telegraph drawn up by Lord Wolfson, chief executive of Next. He has donated £293,250 to the Conservatives since 2006 and was made a Tory peer three weeks after the May election.It really says everything about the relationship between the Conservative Party and these business leaders that they will send round-robin letters at a moments notice backing Tory policies. And it's notable that, when they asked the Tories to reverse Labour's plans to raise national insurance contributions by 1%, that Osborne raised it for employees, but not employers.
Another signatory, Sir Christopher Gent, non-executive chairman of GlaxoSmithKline, has given £113,400 to the Conservative Party since 2003, while Aidan Heavey, chief executive of Tullow Oil, has donated £5,500.
Seventeen of the 35 chairmen or chief executives who signed yesterday's letter were among the businessmen who endorsed a similar round-robin before the May election backing Tory plans to reverse Labour's proposal to raise national insurance contributions by 1 per cent. Mr Osborne later cancelled it for employers but retained it for employees.
One of these same business leaders who is demanding that welfare be slashed and social services axed - rather than see a rise in taxation - earns £6.5 million a year.
Now some economists have spoken out about the twaddle these supposedly impartial business leaders are spouting:
As I've said a thousand times, no-one is suggesting that we don't need to do something about the deficit, but there really is no need to pay off the mortgage in five years rather than twenty five.
Christopher Pissarides, Britain's new Nobel laureate in economics and professor of economics at the LSE, said: "I am rather puzzled as to why big companies think the private sector will create jobs if the cuts are immediate rather than spread over two or three years, to give the private sector time to plan ahead. The situation is not so grave; there is no big risk premium of government debt as in Greece or Spain. I see a lot of confidence in the ability of the British Government to control the deficit. That confidence will remain if there is a well-arranged plan over the next few years rather than the next few months."
David Blanchflower, a former member of the Bank of England's Monetary Policy Committee, said of the letter: "It's a terrible, terrible mistake. The sensible thing to do is to spread [the cuts] over a long time. Clearly you have to deal with the deficit, but there is no economics that says you have to deal with it in a week or a month."
Stephen Alambritis, chief spokesman for the Federation of Small Businesses, said: "Large companies can take these cuts in their stride. The City will reward them with a higher share price if they reduce their workforce. But the Chancellor should not be emboldened by these business leaders.
"Some small firms rely on public-sector contracts for 50 or 60 per cent of their turnover. If the cuts are swingeing and overnight, these companies will be lost to the UK economy forever."
People should remember that we finally paid off our WWII debt during the premiership of Tony Blair. And, that shortly after WWII, with debts far greater than the ones we currently face, we built a welfare state and much of our social housing.
All of this undermines Osborne's fallacy that he has no choice other than the one he is proposing. He's doing this because he wants to slash the cost of the state, not because it is the only possible solution to the situation we currently face.
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