Coalition urged to delay cuts
By politics.co.uk staff
Chancellor George Osborne should respond to Britain’s struggling economy by delaying the spending cuts process, an economic thinktank has said.
The National Institute for Economic and Social Research (Niesr) wants ministers to defer some of the decisions taken in last October’s comprehensive spending review, as the fallout from last week’s disappointing growth figures continues.
They showed GDP growth in the final quarter of 2010 was minus 0.5%, raising fears of a double-dip recession.
“It is likely we will have to face the political reality that some cuts are just not possible in the timetable set out by the government, but ministers should relax and rather than go looking for other things to cut, just let the process take a little longer,” Ray Burrell of Niesr was quoted by the Guardian as saying.
“There is no point dashing about in a hair shirt in the snow, it’s only going to make matters worse.”
Niesr’s quarterly economic review cut its growth forecast for 2011 from 1.8% to just 1.5%.
Labour seized on the news as it sought to blame Mr Osborne for the economic downturn.
The party pointed out the report showed inflation would be higher than officially forecast and that growth would be significantly less than predicted since last year’s spending cuts were announced.
“It’s time for George Osborne to get his head out of the sand, look at the facts and rethink his reckless plan to take another £20 billion out of the economy in April on top of the VAT rise,” shadow chief secretary to the Treasury Angela Eagle said.
“He needs a plan B and he needs one quick.”
Economists say the effects of spending cuts announced last year are yet to make themselves felt on the economy. Neither is the VAT hike, which was introduced in January this year.
