Oct. 12 (Bloomberg) -- The global cost to taxpayers from the financial crisis is often exaggerated, Goldman Sachs Group Inc. chief economist Jim O’Neill said.

“The fiscal costs of this crisis around the world, including the U.K., in my judgment are not as severe as people keep talking about,” he said, speaking on a panel with Prime Minister Gordon Brown and economists in London today. “To be obsessively focused on getting the deficit down as quickly as possible is not the right thing to do.”

Britain’s budget deficit will reach 12 percent of national income next year, the most in the Group of 20 nations, according to Treasury forecasts. While opposition Conservative leader David Cameron says the shortfall is the biggest threat to the economy, Brown said today that Cameron’s plan to squeeze public spending would prolong the recession.

“It’s suddenly become very trendy to be the toughest person around, whether you’re in the private sector, or in government, or opposition, as to what we’re going to do about the deficit,” O’Neill said. “We need to get growth back, and then we can have a more sensible look at what the true fiscal position is.”

Brown is seeking to win back voters’ support before the next election, which must be held by June. An ICM Ltd. poll published yesterday showed the Conservatives had the support of 45 percent of voters compared with 26 percent for Labour.

The U.K. economy shrank 0.6 percent in the second quarter, less than previously estimated, and the National Institute of Economics and Social Research said last week gross domestic product stopped falling in the three months through September.

‘Chill Out’

O’Neill said people should “chill out” about the Bank of England’s emergency asset-purchase program. The Bank of England last week stuck to its plan to buy 175 billion pounds ($277 billion) of bonds with newly-created money to cement Britain’s recovery from the worst recession in a generation.

“There’s a ridiculous stigma with the whole thing in this country,” O’Neill said. “There’s lots of other countries doing unconventional monetary policy things and people should chill out a bit about it.”

O’Neill also said that people get too focused on seeing lower bond yields as a measure of the success of the bank’s asset purchases.

“Actually, gilt yields ultimately going up, so long as financial conditions are still friendly, is probably a really good sign of it working even more,” he said. “People need to be a bit more focused on reality and not be so emotional.”

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

Last Updated: October 12, 2009 07:40 EDT