Nearly half of the leading economists who signed a letter two years ago endorsing the Chancellor, George Osborne’s deficit reduction plan have now changed their mind and urged the government to slow the pace of cuts and come up with a plan for economic growth.
The 20 economists were contacted by the New Statesman and nine replied that they felt alternative economic policies should be pursued, whilst the other 11 failed to reply. The nine felt a slowing in the pace of cuts, tax cuts and infrastructure spending are now required.
Capital Economics founder, Roger Bootle said that encouraging the private sector to spend the money that have been hoarding was vital.
“If I were chancellor at this point, I would alter the plan, I would stop the cuts to public investment and I might even seek to increase it,’ Bootle told the New Statesman.
“Supply side reform might be welcome but what we are talking about here is shortage of demand. The key thing is to try to get the private sector to spend its money and that might require a bit of government spending to prime the pump.”
Mr Osborne described the original letter when it was issued in February 2010 as “a decisive moment in the economic debate”. It said that the deficit reduction programme would be vital in helping the UK maintain credibility with gilt investors and ratings agencies.
Oxford University professor of economics and chair of the Independent Commission on Banking, Sir John Vickers was one of the economists who refused to endorse the government’s economic policies this week when asked.
Economics professors at the London School of Economics, Cambridge University, York and Harvard universities have all changed their minds on supporting cuts and are calling for the government to spend money to boost growth.