The United Kingdom is likely to plunge back into a recession with its current budget plan, said former Bank of England policymaker David Blanchflower.
The potential decreases in the budget will force the economy into another recession, he told Bloomberg Television.
“You can’t just decimate the public sector and assume the private sector will step into the hole," he said. "The danger now is we’re certainly going into a double dip recession. I think that’s absolutely certain given what’s coming.”
Chancellor of the Exchequer George Osborne plans to slash spending to halt the increasing budget deficit. His plans also include cuts for welfare and boosting taxes on banks.
The United Kingdom needs to create a “plan for growth,” Blanchflower said.
“When you pull the stimulus away, the question is, ‘what does the private sector do?’ Cut and cut and cut is a crazy thing to do. We’re repeating lessons of history. This is what happened in the 1930s. The danger is it drives us into recession,” he said.
The United Kingdom is in much better shape than Greece, Blanchflower said.
“The U.K. is demonstrably not Greece. We have a sensible fiscal regime, we have our own central bank, we have an exchange rate,” he said.
The United Kingdom's small business owners are fearful of the weak economy continuing, The Economy News reported.
“SMEs are the engine room of the British economy, yet the build-up to this budget is sending a fear factor through the entrepreneur community. Small business owners are deeply concerned that tax rises and spending cuts may lead us to a double dip,” said Alastair Douglas, head of analysis at SimplyBusiness.co.uk.
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