Industry chiefs including Next chief executive Lord Wolfson, Marks & Spencer chairman Sir Stuart Rose and Harvey Nichols chief executive Joseph Wan, have backed the coalition Government’s public spending cuts and said that any lesser action would result in £100bn of additional debt, a rise in interest rates and further tax rises.
In a letter published in The Daily Telegraph today, 35 business leaders urged the Government not to hesitate or water down plans to tackle the budget deficit.
The signatories, which also included LK Bennett chairman Robert Bensoussan and Asos chief executive Nick Robertson, said that a failure to take urgent action to cut Britain’s debt would lead to international markets losing confidence in Britain, with disastrous consequences for the economy.
The backing from key industry figures is a boost to chancellor George Osborne, who will deliver his Comprehensive Spending Review on Wednesday to make £83bn savings in state spending.
Wolfson, who drafted the letter, offers reassurances that job losses in the public sector would be absorbed by the private sector.
The letter reads: “Everyone knows that when you have a debt problem, delaying the necessary action will make it worse not better.
“The cost of delay is enormous, and would result in almost £100bn of additional national debt by the end of this Parliament alone.
“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 cost of delay could be even greater than this.
“As recent events in some European countries have demonstrated, if the markets lose faith in the UK, interest rates will rise for all of us.”
The coalition received a further boost today with the publication of an Ernst & Young Item Club report that says the likelihood of a double-dip recession in Britain had been exaggerated. It said: “The economy is likely to slow over the winter following a surprisingly positive first half of the year, but I think this will be a soft patch, not a double dip.”
SIR – It has been suggested that the deficit reduction programme set out by George Osborne in his emergency Budget should be watered down and spread over more than one parliament. We believe that this would be a mistake.
Addressing the debt problem in a decisive way will improve business and consumer confidence. Reducing the deficit more slowly would mean additional borrowing every year, higher national debt, and therefore higher spending on interest payments.
The cost of delay would result in almost £100 billion of additional national debt by the end of this parliament alone. In the end, the result would be deeper cuts, or further tax rises, in order to pay for the extra debt interest.
The cost of delay could be even greater than this. As recent events in some European countries have demonstrated, if the markets lose faith in Britain, interest rates will rise for all of us.
There is no reason to think that the pace of consolidation envisaged in the Budget will undermine the recovery.
The private sector should be more than capable of generating additional jobs to replace those lost in the public sector, and the redeployment of people to more productive activities will improve economic performance, so generating more employment opportunities.
So, each writing in our personal capacity, we would encourage George Osborne and the Government to press ahead with his plans to reduce the deficit.
In the long run it will deliver a healthier and more stable economy.
Chairman, L.K. Bennett
Chief Executive, Mothercare
Sir Stuart Rose
Chairman, Marks & Spencer
Chief Executive, Harvey Nichols
Chief Executive, Next