Economists back the government
By Ian Dunt
A group of economists have thrown a lifeline to Alistair Darling by backing his calls for delayed cuts to public expenditure.
Over 60 heavyweight economists warned against premature action to cut the deficit in a joint letter to the Financial Times.
Gordon Brown siezed on the letter as proof of the validity of his economic policy this morning.
“Put simply today’s letter to the FT by over 50 leading economists argues that the first priority must be robust growth,” he told a conference of centre-left European governments.
“I say to the British people this is not the time to put the recovery at risk, this is the time to make sure that growth and jobs are secured.”
The move comes just days after a group of senior economists wrote to the Sunday Times demanding cuts in this financial year, to alleviate concern in the markets.
But two separate letters today put many of the most well-respected economists in the country behind the government.
“With people’s livelihoods at stake, a responsible government should avoid reckless actions,” the signatories wrote.
The intervention is vital to Gordon Brown and chancellor Mr Darling. The two men have relied on an international consensus on a spending orientated road out of recession to bat away Tory attacks of financial irresponsibility.
Today’s letters brand the Sunday Time’s writers irresponsible and short-sighted.
“How do the letter’s signatories imagine foreign creditors will react if implementing fierce spending cuts tips the economy back into recession?” they ask.
“For the good of the British public – and for fiscal sustainability – the first priority must be to restore robust economic growth.”
Those comments were found in the first letter, organised by Lord Skidelsky, a cross-bench peer and biographer of the influential economist John Maynard Keynes.
The other letter, organised by Lord Layard, emeritus professor of economics at the London School of Economics, urged a more historical approach to the debate.
“While unemployment is still high, it would be dangerous to reduce the Government’s contribution to aggregate demand beyond the cuts already planned for 2010-11,” the letter reads.
“History is littered with examples of premature withdrawal of the government stimulus, from the US in 1937 to Japan in 1997. With people’s livelihoods at stake, a responsible government should avoid reckless actions.”
The economists responsible for the letters include two nobel prize winners, five former members of the Bank of England’s monetary policy committee and two former deputy governors.
Speaking on the Today programme this morning as Westminster came to terms with the development, Lord Skidelsky questioned whether governments should respond merely to the markets, especially after they got us into the financial crisis in the first place.
“On the whole we need to take into account the fact that the well-being of our people is not exactly the same as the well-being of bond traders,” he said.
