Time for a Plan B: Economists turn against Osborne
By Ian Dunt
George Osborne found himself increasingly isolated today as a small army of economists demanded he back down over his deficit reduction plan.
In a development that will warm hearts on the Labour frontbench, dozens of senior economists – including several who have previously voiced support for spending cuts – argued the “breakneck deficit-reduction plan is self-defeating even on its own terms”.
In a letter to the Observer, the group demanded that the chancellor construct a Plan B or face a continued deterioration in the economic outlook of the country.
The deficit reduction plan “will probably not manage to close the deficit in the planned time frame and the government’s strategy is likely to result in a lot more pain and a lot less gain”, the letter says.
The group suggests clamping down on tax avoidance and evasion, raising taxes on “those best able to pay”, financial reform, a green new deal and a “better work-life balance” as tools to improve UK economic performance.
Recent research suggests the UK economy is too dependent on credit – both in the private and public sector – to be able to grow during a period of government spending cuts and restricted lending.
With growth remaining stubbornly low, the pressure on Mr Osborne is likely to increase once the pain of spending cuts starts to hit home this year.
The continued debt crisis in Greece and sluggish US performance also suggest that the UK will struggle to significantly improve growth.
“The disappointing figures we’ve had, particularly on manufacturing, seem to be further evidence that the economic recovery is stalling,” shadow chancellor Ed Balls said.
“We’re now set for slower growth, higher inflation and higher unemployment than was forecast a year ago. And the result is that the government is now set to borrow £46 billion more than they had planned.”
A Treasury spokesman commented: “We haven’t seen anything that makes us question what we are doing.”
