Economists warn Govt must speed up deficit cuts
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A group of leading economists has warned the Government must act more quickly to cut the UK’s budget deficit.
In a letter to The Sunday Times, 20 economic experts, including former FSA chairman Sir Howard Davies, warned the measures set out by the Government in last year’s pre-Budget report do not go far enough.
The letter says: “In the absence of a credible plan, there is a risk that a loss of confidence in the UK’s economic policy framework will contribute to higher long-term interest rates and/or currency instability, which could undermine the recovery.
“In order to minimise this risk and support a sustainable recovery, the next government should set out a detailed plan to reduce the structural budget deficit more quickly than set out in the 2009 pre-budget report.”
The economists say the Government should aim to eliminate the deficit over the course of a Parliament, with the first measures beginning to take effect in the 2010-2011 fiscal year.
They believe the majority of the cuts should come through government spending while tax increases should be broad base and minimise the effect increases in marginal tax rates would have on employment and investment.
The Conservatives say the letter vindicates their calls for more dramatic cuts from the Government.
Shadow Chancellor George Osborne (pictured) says: “This is a decisive moment in the economic debate in Britain — a moment when Gordon Brown’s argument on the deficit has collapsed and a new consensus for more decisive action emerges.”
“An impressive array of top economists, not just from Britain but around the world, are clearly warning that the government does not have a credible plan to deal with the deficit and that this threatens the recovery with higher interest rates.”
Chancellor Alistair Darling says he will present next month’s Budget with “the most ambitious deficit reduction plan of any G7 country”. However, the Government has repeated its concerns about withdrawing its current fiscal stimulus too soon.
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Readers' comments (3)
Peter herd | 15 Feb 2010 10:03 am
Although I would agree with some of the comments in this article, as there is a lot of waste in government spending at present which need to be cut. Both parties are guilty of not coming up with plans of how to stimulate small businesses. A good example of this is the Small Loans Guarantee Scheme or as it is now known the Enterprise Scheme which is now so complex that Banks are scared to lend through it. The reason for this is that although the government will provide a guarantee to business with lack of security they will take a dim view of any Bank lending recklessly. This is the precise problem what is reckless as lending is all about risk. The banks find themselves in a Catch-22 situation as they are being encouraged to lend but also told that they have to take less risk. The problem is that banks have spent the last 10 years lending to either property people or private equity firms which has been easy pickings when the market has been going well. In reality banks need to lend more to the vast array of different businesses and that will be the solution in the long-term.
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john Whipple | 15 Feb 2010 11:25 am
Oh dear, is this the best they can come out with?.
Why have they not formed a plan?
Of course the most vulnerable and poorest have got to pay proportionally the most. Always had to always will have to.Just give us some truth now.
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John Harding | 15 Feb 2010 12:51 pm
Putting forward a 'credible plan' as the economists point out is getting more urgent by the day but as it does not fit with 'Crash' Gordon's re-election strategy it will therefore not happen, unless he can get the Tories to come out with a plan first!
Having the ability to time general elections to suit himself, and let us be under no illusion it is only his immediate future with which he is concerned, Brown will orchestrate things with the budget to deliver the best possible election outcome, for him. He arrogantly believes that his best interests are the Labour parties best interests and also the UK's best interests. That is his order of priority and he will do anything, including using his family, to attempt to fool enough of the electorate for enough time to give him a fighting chance at the election. The unconvincing performance of Alistair Cambell on the Andrew Marr show last week was a soften up for Browns own TV performance a few days later. I repeat the requirements of the UK and it's economy are of secondary importance to the career of Gordon Brown.
For some reason the Tories seem willing, though uncomfortable, to let the PM get away with his constant jibes about them either not having proper plans for debt reduction or else that their, not unreasonable instinctive reaction to wanting to reduce these high levels of debt ASAP, is wrong.
The riposte should surely be that it is the Govt. that has all the available information so it is the Govt. that should be putting forward the plans.
While the Tories are naturally being briefed by Civil Servants the suspicion that the figures and the situation are considerably worse than the Labour 'Spin Machine' would have us believe should not be overlooked.
In such a scenario the Govt. doesn't dare come out with a plan that addresses the situation, as it really is, because it would lead to total electoral wipeout while the Tories will want to be able to say, should they form the next Govt., that the figures were so much worse than they were lead to believe that the situation will require austerity measures for the next 20 years. So it is a standoff to see who blinks first.
Brown should be ashamed of his actions in this whole sorry scenario. He was telling us only 18-24 months ago that the UK was the best placed of the major economies to weather the economic storms, because off course he had been running things for so long. That claim is now shot to bits but his inability to admit to getting anything wrong prevents him from moving to put things right.
In some sense this would be a good election for the Tories to loose, then at least Brown would have to confront the vast mistakes he has made rather than claiming that this recession was 'Made in the USA'. The problems there were only the spark that set off the whole thing. The failure of the UK's regulatory systems together with the spendthrift ways of another Tax and Spend Labour administration was the root cause. I thing every Labour administration in the past 50 years has left a pretty much broken economy in it's wake. The Tories have not been perfect managers but at least they have certain basic attitudes that lead them in the right direction, unlike Labour who seem to think that they can always Tax and Spend. To this they have now added Control and Micro Management of citizens lives. What a load of rubbish.
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