A group of 50 economists have hit out at Chancellor George Osborne’s deficit reduction plans, claiming that they are not working and the Government “urgently” needs to adopt a “Plan B”.
In a letter to The Observer newspaper last week, the group, which includes many university economists, says the Government’s “breakneck” deficit reduction is “self-defeating” because it relies heavily on spending cuts which undermine growth. It cites recent weak economic figures as evidence of its detrimental impact.
Growth in the past six months has effectively been flat as first-quarter growth of 0.5 per cent followed a 0.5 per cent contraction in the final quarter of 2010.
In March, the Office for Bud-get Responsibility cut its growth forecast for 2011 from 2.1 per cent to 1.7 per cent.
The economists believe that a more effective strategy for sustainable growth would be achieved by clamping down on tax avoidance and evasion and raising taxes on the wealthy.
But Osborne has rejected the claims. In an interview with the BBC Today programme last week, Osborne said the plan to eliminate the deficit by the end of the Parliament is credible and has been backed by many independent groups as well as financial markets. He said: “You can always assemble a group of left-wing academics to criticise what we are doing. That does not mean that is where the consensus of opinion is.”
Osborne said the Government is on course to remove the deficit a year before the end of the Parliament in 2015, giving him “flexibility” in delivering his plan.