Coalition cuts will lead to UK recession, says George Soros

Out in Davos, the financier says the UK Government will have to modify its austerity programme to avoid recession.

by James Taylor
Last Updated: 19 Aug 2013
Somehow, we doubt that George Soros is PM David Cameron's favourite financial speculator. This is, after all, the man whose massive bets against the pound forced the UK into a humiliating exit from the European exchange rate mechanism - at a time when Cameron was working for then-Chancellor Norman Lamont. Now Soros, who's out in Davos for the WEF, has given the PM more reason for disquiet: he's said that the Goverment will push the UK back into recession unless it backs down from its tough programme of cuts. He's never going to get an invite to Chequers at this rate.

It all started well, as far as Dave and the Coalition were concerned; Soros began by opining that the Government was right to embark on an austerity drive, as evidenced by the generally positive market reaction. Unfortunately, he then also went on to suggest that the programme would have to be modified when the effects become visible. 'I don't think it can possibly be implemented without pushing the economy into a recession,' Soros said, rather scathingly.

This reflects badly on the Government in two ways. First, it suggests that they've got their strategy wrong. And second, it suggests they haven't fully understood the consequences of their current tactics. So it'll be meat and drink to the Opposition, who, in heated exchanges at PMQs yesterday, claimed the Coalition's economic policies were 'hurting, but not working'. Even deputy PM Nick Clegg is now admitting that the cuts will have a 'chilling' effect.

Nor was Soros the only high-profile figure casting aspersions on the UK's prospects in Davos yesterday: US economist Nourel Roubini, aka Dr Doom, bracketed the UK with 'the peripheral eurozone economies' as being particularly vulnerable to a double-dip.

Naturally, the Government continues to insist that we're on the right track, and - not unreasonably - that it's daft to change policy on the basis of one bad quarter. But Cameron will know as well as anyone the importance of sentiment. And criticism like this, from high-profile experts, will only add to the general feeling of nervousness about how much all these cuts are going to hurt - thus destroying confidence even further.

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