A group of leading economists has called for George Osborne to change course on his deficit reduction strategy, saying that it is "stalling".
A letter to the Observer signed by 47 academics and economists said:
Recent economic figures have shown that the government urgently needs to adopt a Plan B for the economy. As economists and academics, we know the breakneck deficit-reduction plan, based largely on spending cuts, is self-defeating even on its own terms. It will probably not manage to close the deficit in the planned time frame and the government's strategy is likely to result in a lot more pain and a lot less gain.
We believe a more effective strategy for sustainable growth would be achieved:
- through a green new deal and a focus on targeted industrial policy.
- by clamping down on tax avoidance and evasion, as well as by raising taxes on those best able to pay
- through real financial reform, job creation, "unsqueezing" the incomes of the majority, the empowerment of workers and a better work-life balance.
These are the foundation of a real alternative and it is time the government adopted it.
Damagingly, several people have signed who were signatories of a letter to the Sunday Times last year which supported the Conservatives' approach. This indicates worry across the board about the slow rate of growth. Britain's economy grew by a sluggish 0.5 per cent in the first three months of this year but inflation rose by more than expected to 4.5 per cent.
The former chief economist at the Cabinet Office Jonathan Portes has also called for a change of course. Now director of the National Institute of Economic and Social Research, he said: "You do not gain credibility by sticking to a strategy that is not working." Sadly, Osborne does not appear to see it that way.