LIVERPOOL, England (Reuters) - Britain faces a double-dip recession if high government debt is tackled too soon through spending cuts, the Trades Union Congress said on Sunday.
There are signs Britain is emerging from a sharp recession but big risks to recovery remain such as banks’ continued reluctance to lend and the considerable fiscal tightening that lies ahead to reduce a ballooning public sector deficit.
With an election due by mid-2010, the focus has fallen on where any future government would aim spending cuts and tax rises.
The main opposition Conservatives, who are expected to concentrate on the public sector for much of the consolidation, are well ahead of Labour in opinion polls.
“Public spending cuts will provoke a double-quick, double-dip recession,” TUC chief Brendan Barber told reporters in Liverpool on the eve of the TUC’s annual conference which brings together delegates from across Britain’s labour movement.
“Unemployment could well exceed four million.”
Prime Minister Gordon Brown, who will address the conference on Tuesday, is set to say the country’s economy was on the “road towards recovery,” but care had to be taken.
“Today we are on a road towards recovery — but things are still fragile not automatic and the recovery needs to be nurtured,” he will say, according to extracts of his speech released on Sunday.
Britain’s public sector borrowing is predicted to hit a record 175 billion pounds this year due to the recession and extensive state life-support measures.
“You can’t fight recession without making the short-term deficit bigger,” Barber said. “Going for recovery is the best way to tackle the deficit in the long term.”
If they win the election, the Conservatives are expected to move swiftly to cut a deficit which they have warned could harm the pound and put Britain’s top grade credit rating at risk. Labour, which gets more than half its funding from unions, has said painful choices lie ahead but it is more likely to take a softer approach and will be more prepared to hike taxes.
Two opinion polls said on Sunday that voters trust the Conservatives with public services more than Labour.
Fearing their political soul-mate is on the verge of losing power, big Labour-affiliated unions came out in force on Sunday to urge their members to support Brown.
“We can’t afford a Conservative government wrecking ... the economy in a way that suits the rich and well-off but actually affects working people,” Derek Simpson, joint general secretary of Britain’s biggest union Unite, told Sky News. Brown, who held a meeting with unions on Friday, will warn delegates the policies of a Conservative government would endanger the recovery. “We have to make tough choices in public spending,” he will say. “Don’t risk your members’ jobs or the nation’s future with the Tories.”
Editing by Elizabeth Fullerton