Business

35 business leaders back Osborne's cuts

BBC business editor Robert Peston on the the Comprehensive Spending Review

We have heard the reasons why the chancellor should reduce or delay his planned cuts in public spending - whose details will be announced on Wednesday - from the generals, senior police, university teachers, and the trade unions, among many others.

But apart from Tory and Lib Dem MPs and some economists, there haven't been many others urging George Osborne to stick to his budget pledge to reduce public expenditure by an unprecedented £83bn over the coming four years.

Until now.

In a letter in tomorrow's Daily Telegraph, 35 business leaders say they "would encourage George Osborne and the Government to press ahead with his plans to reduce the deficit". They add that it would be a "mistake" to water down or delay the deficit reduction plan.

For what it's worth, I think their wish will be granted, come the announcement of the Comprehensive Spending Review on Wednesday.

I don't see any sign of the chancellor or the Treasury changing the round numbers for spending reductions that were published in the budget Red Book on 22 June (although achieving the first year cuts will not be easy, given that there is an element of "spend to save" in much of what the government wants to do).

Even so, some will see it as striking and significant that the letter seems to re-cast British politics back in the mould that appeared to have been smashed by New Labour in 1997, that of a conflict between what used to be called capital and labour - in that many business leaders back the public spending cuts, and most trade unions oppose them.

In the letter, the bosses of companies including BT, Kingfisher, Asda, Carphone Warehouse, Microscoft UK, Whitbread, Alliance Boots, Diageo, Next, Hammerson and MITIE claim that "addressing the debt problem in a decisive way will improve business and consumer confidence".

They insist that "the private sector should be more than capable of generating additional jobs to replace those lost in the public sector".

And they argue that if the cuts are delayed, there would eventually be deeper cuts or greater tax rises, to meet the increased interest costs on national debt that would be £92bn higher - according to the Office for Budget Responsibility - under the plans of the previous Labour government.

Some of the signatories - such as Lord Wolfson, chief executive of Next, Paul Walsh of Diageo and Ian Cheshire of Kingfisher - are widely viewed as Tory supporters, who also signed a letter before the election calling on any new government to make the public sector more efficient.

But the intervention of others - such as the chief executive of BT, Ian Livingston, the founder and chairman of Carphone Warehouse, Charles Dunstone, the chairman of ASDA, Andy Bond, and the managing director of Microsoft UK, Gordon Frazer - will be seen as more surprising names.

Mr Dunstone, for instance, was a high profile business backer of Tony Blair's New Labour government.

The 34 businessmen and one businesswoman (Ruby McGregor-Smith, chief executive of the outsourcing conglomerate, MITIE) all say that the letter represents their personal views.

However the letter only carries weight because of the positions they occupy in the private sector. So there will be some who question whether this intervention in a highly charged political battle is appropriate for those running companies owned by pension funds and other institutions which look after the savings of millions of people with diverse affiliations and views.

The 35 also make one statement that will amuse many economists. They say "everyone knows that when you have a debt problem, delaying the necessary action will make it worse not better".

That may be true of individuals and even for most businesses. But there is a whole school of economists, largely those who call themselves Keynesian in some way, who would describe that statement as laughable.

They would argue that it was the application of prudent principles of personal finance to the level of the state that was to a large extent responsible for the severity of the Great Depression of the 1930s.‬‪

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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