Former Secretary of State Peter Hain has warned that public spending cutbacks will be an “absolute disaster” for Northern Ireland — with potential dangers for the peace process.

Mr Hain's comments come in a week that has seen top economists warn that the province is going to suffer disproportionately from the funding squeeze.

The former Labour Cabinet member told this newspaper: “The cuts are a disaster for Britain but an absolute one for Northern Ireland, as I know only too well from my time as Secretary of State.

“Just when stability is vital to build a new shared future, the savagery of the Conservative/Liberal cuts will cause business bankruptcies because so many more are dependant upon public investment than elsewhere in the UK.

“So lasting damage will be done to the private sector and not simply to essential public sector jobs and services.”

Mr Hain added: “Also, when it is so important to have job opportunities for young people in republican communities who may otherwise be drawn into dangerous dissident IRA activity, the cuts will crush many hopes.

“The tragedy is the manic scale of these cuts is unnecessary. The deficit could have been adequately reduced by a combination of spending restraint and investment in growth.

“The Government's programme

is driven by right wing ideology that failed in the 1930s but is sadly being repeated.”

Yesterday, a special Belfast Telegraph report revealed responses from a survey of leading economists on Northern Ireland's situation.

The main message was that the province's economy will suffer more from looming spending cuts than other UK regions, due to its reliance on public expenditure.

US-based Professor David Blanchflower said: “I believe that this Government's misguided economic policies are going to be disastrous for the UK economy in general and will hit Northern Ireland especially hard.”

A report issued by accountants PwC yesterday said business activity in the province has declined for 31 consecutive months.