The prime minister's adviser on enterprise has told the cabinet that the economic downturn is an excellent time for new businesses to boost profits and grow because labor is cheap, the Observer can reveal.
[David Young,] Lord Young, a cabinet minister under the late Baroness Thatcher, who is the only aide with his own office in Downing Street, told ministers that the low wage levels in a recession made larger financial returns easier to achieve. His comments are contained in a report to be published this week, on which the cabinet was briefed last Tuesday.
Young, who has already been forced to resign from his position once before for downplaying the impact of the recession on people, writes: "The rise in the number of businesses in recent years shows that a recession can be an excellent time to start a business.
"Competitors who fall by the wayside enable well-run firms to expand and increase market share. Factors of production such as premises and labor can be cheaper and higher quality, meaning that return on investment can be greater."
A Downing Street spokesman said Young was merely stating a "factual point and nothing else". But the comments were described as "appalling and ill-timed" by union leaders, with job-market figures due out next week expected to show that the initial resilience of employment has faded while wages are being severely tightened.
UK employees' average hourly earnings have fallen by 8.5% since 2009 in real terms, adjusting for inflation, according to the Office for National Statistics (ONS).
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