Economists' letter backs Labour's approach to tax

The economists – 19 more than on a version of the letter leaked yesterday – warned that David Cameron's plan to cut 6bn from state spending this year would cost jobs and risk tipping the UK back into recession.

Conservatives say they would use the cash to reverse next year's planned increase in National Insurance (NI), which they have branded a "jobs tax". They say they can find the money from government waste without affecting frontline public services.

But the letter, published in The Times yesterday and organised by economics professors Lord Skidelsky of Warwick University and Lord Layard of the London School of Economics, warned that the move would "lead directly to job losses" and imperil Britain's efforts to repay its record deficit.

Conservatives responded with their own letter signed by 415 leaders of small and medium businesses who say that scrapping the NI rise would "protect jobs and support the recovery".

The economists, including academics from UK universities including Oxford and Cambridge, as well as professors from Germany, the US and other countries around the globe, warn that the Tory plans would be "destabilising".

They argue: "It will lead directly to job losses and indirectly to further falls in spending.

"At a time when recovery is delicate, it could even affect confidence to the degree that we are tipped back into recession – with much larger job consequences.

"This is not the time for such a destabilising action. The recovery is still fragile ... Only when the recovery is well under way will it be safe to have extra cuts in government expenditure."

The economists argue that the government should now be seeking to ensure a return to growth, which would boost tax receipts.

"Rash action now could imperil not only jobs but also the prospects for reducing the deficit," they warned.

Chief Secretary to the Treasury Liam Byrne said: "This letter is very significant. Signed by some of the world's leading economists, it sounds alarm bells about the risk the Tories pose to the recovery.

"Economic judgment, not political tactics, is critical in the current climate.

"The decisions we take in the coming months will affect the prosperity of families and firms for years to come.

"Now that we are on the road to recovery, it is vital we stay the course.

"The Tories have been wrong on the recession, they are wrong on the recovery and they are a risk we cannot afford," added Mr Byrne.