Claims by a senior adviser to David Cameron that lower wages in a recession help make it a better time to start a business have been defended by Downing Street.
Trade unions and Labour seized on the analysis by Lord Young, accusing him of "revelling in" the availability of cheaper workers.
But Number 10 said the Tory former minister was simply reflecting the fact that start-ups tended to multiply and thrive during economic downturns and accused critics of deliberately misinterpreting his words.
His latest comments are in a report for the Prime Minister on measures to promote small business growth. In it he writes: "The rise in the number of businesses in recent years shows that a recession can be an excellent time to start a business. Despite tough economic conditions the number of new businesses has remained remarkably resilient and at historically high levels. Business closures have remained stable and lower than pre-recession levels.
"It has always been the case that a recession can be a good time to grow a business. This is true for a number of reasons. Competitors who fall by the wayside enable well-run firms to expand and increase market share. Factors of production such as premises and labour can be cheaper and higher quality, meaning that return on investment can be greater."
Giant US firms such as GE, Microsoft and Disney all started during a recession as did half the firms on the 2009 Fortune 500 list, he points out.
TUC general secretary Frances O'Grady told The Observer: "The 2.5 million people still out of work will wonder what planet Lord Young is living on when he claims recessions bring economic gains. Not only is the Government failing to deal with the living standards crisis, their advisers are revelling in the jobs and wage squeeze that is putting people's finances under strain."
Labour vice-chairman Michael Dugher said: "This is yet more evidence of just how desperately out of touch David Cameron's government has become. Whilst millions of hard-pressed families are feeling the squeeze and the Government gives out tax cuts for millionaires, Cameron's adviser seems to celebrate low wages for many in a recession."
A Downing Street spokesman said: "Lord Young doesn't say a recession is a good time, he says it can be a good time to start a business, which is borne out by the statistics. The TUC is deliberately misrepresenting his report to suit their political agenda."