Soros warns PM: cuts will lead to recession

George Soros has warned David Cameron that he must do an about-turn on his austerity measures – or face plunging Britain back into recession. The international speculator spoke out last night as the World Economic Forum got under way in Davos, Switzerland. He warned that a mixture of tax increases and spending cuts were "unsustainable".

The hedge fund owner, who made a profit when the pound crashed on Black Wednesday in 1992, under the last Conservative administration, said: "I think they may be right in embarking on it [the austerity programme] but I think they will probably have the sense that they will have to modify it when the effects are felt. I don't think it can possibly be implemented without pushing the economy into a recession."

The warning came hours after Cameron insisted there would be no change of policy following news that the economy contracted by 0.5 per cent in the final three months of 2010.