Tories incompetent, says economist Blanchflower

The general hum of public reaction to Shadow Chancellor George Osborne's "austerity" speech last week, and David Cameron's follow-up when he said the public deficit must be cut immediately, was that the medicine might be sour, but Britain had to take it. Wrong, says one of Britain's leading economists, and wrong again.

David Blanchflower's campaign to persuade the country that Osborne and Cameron are misguided knows no bounds. Responding to the Manchester speeches, Blanchflower has followed up his regular attacks on Osborne in the New Statesman with articles in the Guardian on Friday, the Daily Mirror on Saturday and an interview with the Observer on Sunday.

The message from the professor of economics at Dartmouth College, New Hampshire, and the man Mervyn King at the Bank of England credited with "being right" about reducing interest rates to tackle the banking meltdown last year, is simple: "You don't cut public spending in a recession".

By suggesting that we do so, Osborne and Cameron "show absolutely no understanding of basic economics", Blanchflower wrote in the Mirror. "I guess that isn't surprising given that neither of them, as far as I can tell, has any background or training in economics. And it shows."

Blanchflower's main concern is that what happened in the Great Depression in the United States will be repeated here if Cameron and Osborne have their way.

The American economy first crashed in 1929, but by 1933 it had largely recovered. However, the American authorities, assuming the recovery was fully established, introduced measures to tightened monetary and fiscal policy too early. This drove the US back into a deep recession at the end of 1937.

"We are still in the depths of the deepest recession of our lifetimes and the Tories look like making a similar policy error," wrote Blanchflower. "It's 1937 all over again."

A recession is not a time to pay off the public debt, he said. "You don't start saving when you are unemployed - that is the time to dip into your savings."

There's no holding Blanchflower back. The Tory policy was driven by ideology, not economic sense, he said, and it threatened to bring rising unemployment, social disorder, rising poverty, falling living standards and even soup kitchens. "I haven't seen such blinding incompetence for a very long time," he concluded.

Rising unemployment among teens is one of Blanchflower's biggest concerns. In the Observer yesterday, he warned that the jobless figures due this Wednesday could show youth unemployment passing the million mark.

He urged an immediate increase in the school leaving age to 18 and the payment of welfare benefits to young people working as interns. "The government should do anything it can to stop young people being unemployed," he said.

Blanchflower shows no signs of taking on the Tories for ego purposes. As The First Post reported last December, he took no pleasure in being right about the need for rate cuts: "I'm very upset that I got it right," he told the Guardian at the time. "I think of it as the winner's curse. This is not something I wanted to get right."

Blanchflower, who also teaches at Stirling University, has made his name not just as one the Bank of England's former 'wise men' - the panel who settle interest rates - but also for his research into the economics of happiness which, he claims, declines through a person's middle years and then increases again in retirement.

He will no doubt have paid special attention to the new survey from u.switch.com which shows that Britain, despite paying the highest wages, comes bottom in a quality of life survey of 10 European countries.

Our take home pay may be £10,000 a year higher than the average, but greater taxes, higher day-to-day costs and a higher retirement age - 62 is the norm - contribute to making life in Britain the least enjoyable. And that's before the Tories put the retirement age up to 66. ·