UK Spending Cuts “Crazy - Based on Dogma”: Blanchflower

The spending cuts outlined by the UK treasury are “a crazy cutting agenda,” that could push the country back into recession, according to David Blanchflower, a former member of the Bank of England's Monetary Policy Committee and a professor of economics at Dartmouth College.

St George's Flag & Houses of Parliament
Peter Adams | Photodisc | Getty Images
St George's Flag & Houses of Parliament

Britain’s new Chancellor of the Exchequer George Osbourne announced more than 6 billion pounds ($8.7 billion) in spending cuts on Monday, with most of the savings dedicated to cutting a record budget deficit.

Osborne confirmed that there was going to be £6 billion of cuts immediately, followed by an emergency set of budget cuts on June 22 , plus several tax increases.

More than 240,000 public servants could lose their jobs over the next year as a result of the cuts. Private businesses that support the public sector could also be affected.

“This is not an environment supportive of swingeing public spending cuts,” Blanchflower said.

“Growth is likely to be anemic and well below the MPC's forecasts, which continue to be based on wishful thinking." He continued, "The economy is not in strong enough shape to support this crazy cutting agenda.”

Blanchflower -- who was one of the few economists to predict the severity of the recession -- said the cuts were based on dogma and could push the country back into recession.

The British government intends to slash spending on information technology programs, suppliers and property, recruitment sectors and what they called "low value" spending programs.

Blanchflower attacked the Liberal Democrats’ -- who have formed a coalition government with the ruling Tory party -- for their reluctance to halt such spending, and their hypocricy.

In February, Vince Cable, leader of the Liberal Democrats, stated: “Slashing spending now could push the economy back into recession… what the markets are looking for is a credible plan to reduce the deficit, not a willingness to slash regardless of economic conditions.”

Blanchflower emphasized that while debt levels are high, there is no chance the UK will default on its debt.

“I think the UK is very different to Greece, Spain and the others. It’s not under threat.” Blanchflower told CNBC in an exclusive interview.

Blanchflower believes Britain is in a better position than Greece or Spain due to its weaker currency and £200 billion of quantitative easing by the Bank of England. “Inflation-targeting is from a bygone era,” he said.

Watch a video of the interview with Blanchflower on CNBC

Britain also tends to hold debt with longer maturities relative to other European nations. Much of the Greek debt at the heart of the crisis has to be resold every three months compared to an average of 12 years for UK debt.

Blanchflower claimed that UK unemployment data will be indicative of whether the budget cuts have worked or not.

“If the numbers go down, that will represent success. Should they go up, that means failure.”