One of Labour's biggest donors today warned the party's moderate wing to "wake up" to the fact that continuing to promise austerity-lite was the "road to unelectability."

JML chairman John Mills, who is normally associated with the Blairite wing of the Labour party, said the anti-austerity policies being pursued by Jeremy Corbyn "made a lot of sense" and could be popular with the public in 2020.

Speaking to reporters in central London, he said it was a fundamental mistake to compare the nation's finances to a household paying off its credit card, and warned the UK was being condemned to long periods of low growth.

He said the policies being pursued by the government, and endorsed by some in the Labour party, risked causing widespread dissatisfaction with the governing class and would lead to an increase in support for parties such as Ukip.

He also attacked Tony Blair's government for allowing wholsesale buyouts of British business by foreign companies. He said a new "public interest test" was needed to prevent what was left of British industry being sold abroad.

Mills also expressed limited support for Corbyn's plans to implement so-called "people's quantative easing". He said it was sensible to borrow for investment in capital projects, but warned against any wider application, saying that it was not a "magic trick" that could be relied upon to re-inflate the economy.

However, he also warned that Labour's plans to increase spending would be "disastrous" if they were not matched with a wider strategy to rebalance the economy in favour of manufacturing.

Re-inflating the economy, without rebalancing in favour of manufacturing, would lead to a repeat the kind of financial crisis seen repeatedly under previous Labour governments, he said. Mills added that Labour had been "very effective" at creating such crises over the past fifty years.

Mills criticised Corbyn's recent appearance in front of the Stop the War Coalition Christmas party, but said there were other signs he could move the party to the centre ground over the next few years.

Mills will meet with John McDonnell tomorrow morning to attempt to persuade him to adopt a radical new economic agenda.

He will tell McDonnell the UK is living in a "fools paradise" of high exchange rates and cheap consumer goods. He believes the exchange rate must come down significantly to restore strong growth to the economy.

Asked whether he thought the public would be willing to vote for more expensive holidays, Mills insisted that UK politicians had to take "hard decisions" and then persuade the public they were right. He revealed he had commissioned polling which suggests the public, although largely opposed to weakening the pound, were open to persuasion.

Mills said he would continue to fund the Labour party but would now concentrate more on funding think tanks in order to shift the political and economic consensus in his direction. However, he said he was open to playing a larger role within the Labour party if he were asked by Corbyn.