Business chiefs back George Osborne deficit cut strategy

Chancellor George Osborne's deficit reduction strategy today won backing from the private sector with a letter of support signed by 35 business leaders.

The letter - signed by Marks & Spencer chairman Sir Stuart Rose, BT chief executive Ian Livingston and Asda chairman Andy Bond among others - said there was "no reason to believe" that Mr Osborne's plan to eliminate the £109 billion structural deficit within four years will undermine the recovery.

And it warned that Labour's plan to spread deficit reduction over more than one Parliament would be a "mistake" which would leave the UK almost £100 billion deeper in debt by 2014/15 and increase the risk of interest rate hikes.

The letter to the Daily Telegraph comes as a boost for the Chancellor just two days ahead of Wednesday's crucial comprehensive spending review, in which he will spell out plans for £83 billion of public spending cuts over four years.

Mr Osborne and Prime Minister David Cameron finalised the package in a series of meetings with Deputy Prime Minister Nick Clegg and Treasury Chief Secretary Danny Alexander at Chequers over the weekend, after completing lengthy and sometimes tortured negotiations with Cabinet colleagues.

The CSR is expected to see deeply controversial reductions in areas of public spending such as the police, prisons and social housing.

The Chancellor yesterday declined opportunities to deny that police numbers could fall by thousands and Child Benefit be withdrawn from 16-19 year-olds.

Reports suggested that Ministry of Justice could lose one-third of its £9 billion budget, forcing Justice Secretary Kenneth Clarke to close prisons and slash more than £2 billion from legal aid.

And there was speculation that the £8 billion social housing budget could be all but obliterated.

Shadow chancellor Alan Johnson yesterday accused the coalition Government of "economic masochism" and warned that the pace of cuts risked destroying jobs and growth.

He was today setting out Labour's alternative strategy, which would slow down the rate of deficit reduction by half and raise levies from banks to pay for increased investment in infrastructure.

Mr Johnson said the coalition's plans depend on an extra 2.5 million private jobs being created to take up the slack from reduced public sector activity. He argued there was "absolutely no sign of that momentum developing in the private sector".

But the 35 businessmen insisted that "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."

The letter - also signed by Next chief executive Simon Wolfson, GlaxoSmithKline chairman Sir Christopher Gent and Microsoft UK managing director Gordon Frazer - stated: "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."

Delay in paying down the deficit would leave national debt £92 billion higher by the end of the Parliament than it would be under Mr Osborne's plans, said the letter.

"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."

Mr Osborne yesterday made clear he was determined to see through his plans, which amount to the deepest cuts to public spending since the Second World War.

"Our plan is the plan that will restore credibility to the public finances," the Chancellor told the BBC.

"It is what the IMF, the OECD, international observers say is necessary. It is what British business says is necessary.

"So we have to see this through, and the course which I set in the Budget is the one that we have to stick to.

"People in this country know we were on the brink of bankruptcy, and if we are going to have growth and jobs in the future we have got to move this country into a place where people can invest with confidence."