"Foolish" to rule out double-dip, says new MPC member

A second recession could be on the way warns Dr Martin Weale, the newest member of the rate setting Monetary Policy Committee (MPC).

The economist also fears the Bank of England's growth forecasts of 2.8% in 2011 and 3.2% in 2012 are optimistic.

He said a renewed surge in unemployment, further declines in house prices and further problems for the banks are all risks on the horizon.

However, Weale, who sat in his first MPC meeting this month, said he was unlikely to vote for a rate rise any time soon and he was comfortable with the current low interest rate policy.

The central view of the MPC is the economy will continue to recover, but Weale said a real danger is the chance of another crisis in the financial sector.

Problems could emerge from abroad, with countries struggling with credit issues like Greece damaging confidence in the banking system and further property price falls also hurting the banking sector, he said.

Where some economists think the Government's austerity cuts will destabilise the recovery, Weale said the cuts may have positive side effects.

The Government's cost of borrowing could decline and the "risk of a funding crisis seems to be appreciably lower than it was in May".

Weale was appointed to the rate setting committee by George Osborne after a 15 year stint directing the National Institute of Economic and Social Research. He was a staunch critic of heavy borrowing under the previous government.

For more on the latest speculation about the double dip from business leaders and economists around the world, click here.