No, really, George Osborne - here's your plan B

More economists join the revolt against austerity.

"There is no plan B," declared George Osborne in October 2010, as he slashed public spending to reduce the deficit. He promised that the plan would create "a platform for economic stability".

But as time has worn on, and the UK has plunged into a double-dip recession, more and more experts are urging the Chancellor think again. (This week's New Statesman cover story has nine of 20 who signed a letter in support of Osborne rethinking their positions.)

Now, the Guardian has repeated an exercise done by the New Statesman in October last year and asked leading economists what their Plan B would look like. (They asked seven, including Robert Skidelsky. We asked nine, including Robert Skidelsky).

Some of the advice is fairly straightforward - end austerity and stimulate the economy. Here's Joseph Stiglitz in the Guardian:

The good news is, you're not part of the euro. So my first piece of advice would be, don't join! And second, call off the mad austerity. No large economy has ever recovered from a downturn as a result of austerity. It is a certain recipe for exacerbating the recession and inflicting unnecessary pain on the economy.

And here's Paul Krugman:

My message to you is: do the opposite of what you've been doing for the last two years.

As well as simply "change course", many of the economists have offered concrete proposals. Here at the NS, Jeffrey Sachs called for a financial transaction tax:

I am strongly supporting the call for a financial transaction tax, or FTT, which I believe would add efficiency to the global financial system by reducing destabilising speculation (as argued by James Tobin 40 years ago) and by raising revenues fairly from the undertaxed, high-income financial sector. As you know, we have a race to the bottom in the world tax system as the UK, US and others jostle to attract mobile capital.

This race to the bottom in taxation and regulation was one reason that the financial system became dangerously deregulated in the lead-up to 2008. It is also why US corporate tax revenues as a share of GDP are plummeting. US multinational companies are increasingly hiding their profits in the Cayman Islands and other tax havens. All countries have a shared interest in ending these tax havens.

In both publications, Robert Skidelsky calls for a national investment bank, while both Sushil Wadhwani and Steve Keen advocate giving money directly to the public - either in vouchers or cash - to get them spending (think of it as quantitative easing, but more fun). Other suggestions include a recovery fund, a "green new deal" and cuts to VAT and National Insurance. Jonathan Portes advocated lifting the cap on immigration.

Between the two "Plan B" pieces, and the New Statesman cover story this week, the chorus of voices telling George Osborne where he's going wrong - and how he could fix it - should be growing harder to ignore.

Paul Krugman. Photo: Getty Images

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

Getty
Show Hide image

As a Conservative MP, I want Parliament to get a proper debate on Brexit

The government should consider a Green Paper before Article 50. 

I am very pleased that the government has listened to the weight of opinion across the House of Commons – and the country – by agreeing to put its plan for Brexit before Parliament and the country for scrutiny before Article 50 is triggered. Such responsiveness will stand the government in good stead. A confrontation with Parliament, especially given the paeans to parliamentary sovereignty we heard from Leave campaigners during the referendum, would have done neither the Brexit process nor British democracy any good.

I support the government’s amendment to Labour’s motion, which commits the House to respecting the will of the British people expressed in the referendum campaign. I accept that result, and now I and other Conservatives who campaigned to Remain are focused on getting the best deal for Britain; a deal which respects the result of the referendum, while keeping Britain close to Europe and within the single market.

The government needs to bring a substantive plan before Parliament, which allows for a proper public and parliamentary debate. For this to happen, the plan provided must be detailed enough for MPs to have a view on its contents, and it must arrive in the House far enough in advance of Article 50 for us to have a proper debate. As five pro-European groups said yesterday, a Green Paper two months before Article 50 is invoked would be a sensible way of doing it. Or, in the words of David Davis just a few days before he was appointed to the Cabinet, a “pre-negotiation white paper” could be used to similar effect.

Clearly there are divisions, both between parties and between Leavers and Remainers, on what the Brexit deal should look like. But I, like other members of the Open Britain campaign and other pro-European Conservatives, have a number of priorities which I believe the government must prioritise in its negotiations.

On the economy, it is vital that the government strives to keep our country fully participating in the single market. Millions of jobs depend on the unfettered trade, free of both tariff and non-tariff barriers, we enjoy with the world’s biggest market. This is absolutely compatible with the result, as senior Leave campaigners such as Daniel Hannan assured voters before the referendum that Brexit would not threaten Britain’s place in the single market. The government must also undertake serious analysis on the consequences of leaving the customs union, and the worrying possibility that the UK could fall out of our participation in the EU’s Free Trade Agreements (FTAs) with non-EU countries like South Korea.

If agreeing a new trading relationship with Europe in just two years appears unachievable, the government must look closely into the possibility of agreeing a transitional arrangement first. Michel Barnier, the European Commission’s chief negotiator, has said this would be possible and the Prime Minister was positive about this idea at the recent CBI Conference. A suitable transitional arrangement would prevent the biggest threat to British business – that of a "cliff edge" that would slap costly tariffs and customs checks on British exports the day after we leave.

Our future close relationship with the EU of course goes beyond economics. We need unprecedentedly close co-operation between the UK and the EU on security and intelligence sharing; openness to talented people from Europe and the world; and continued cooperation on issues like the environment. This must all go hand-in-hand with delivering reforms to immigration that will make the system fairer, many of which can be seen in European countries as diverse as the Netherlands and Switzerland.

This is what I and others will be arguing for in the House of Commons, from now until the day Britain leaves the European Union. A Brexit deal that delivers the result of the referendum while keeping our country prosperous, secure, open and tolerant. I congratulate the government on their decision to involve the House in their plan for Brexit - and look forward to seeing the details. 

Neil Carmichael is the Conservative MP for Stroud and supporter of the Open Britain campaign.