Minford tells how Clarke has got it wrong

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The Independent Online
DIANE COYLE

Economics Correspondent

Patrick Minford, one of the Treasury's six high-profile economic advisers, yesterday accused Chancellor Kenneth Clarke of failing to understand the economy.

He said that Mr Clarke's misguided policies were jeopardising the Conservative Government's re-election chances.

"Either Mr Clarke does not care about the economy or he is unable to figure it out. I presume it's the latter," Professor Minford said.

The Liverpool University professor and member of the Treasury's panel of independent forecasters said the November Budget would damage the economy. Professor Minford, a well-known right-wing economist, believes Britain is in a dangerously feeble state.

"The policy is wrong, the evidence shows it is wrong and the Chancellor has failed to override his officials," he said yesterday. "Put crudely, if the Government wants to win the general election, the Chancellor has to ignore the Treasury."

A Treasury spokesman said that Professor Minford was well-known for his forthright views. "The Chancellor is looking forward to receiving advice from the Panel when it meets at the end of the month. He expects a lively and frank discussion," the spokesman said.

In his analysis of the Budget, published last month, Professor Minford described it as "a disaster for free-market policies". He argued that the Treasury and Bank of England had ensnared the Chancellor in a policy of killing inflation at any cost at a time when it was unnecessary - improving Labour's chances.

Yesterday he added: "It is not as if this policy has been widely successful. There is a serious slowdown six months before a possible election." Inflation had been beaten already, he said.

Professor Minford's advice to Mr Clarke is that he should hold a fundamental strategic review of economic policy, drawing on advice from experts independent from the Treasury.

"To be fair to him, not many Chancellors have enough grasp of economics to override their officials. But, at least, others have gone to enormous lengths to check what those officials say with outside experts."

The Panel of Independent Forecasters, of which he is one of the initial members, was no substitute. Members of the Panel are chosen for a wide range of views. "You can't take their reports and knit one, pearl one," he said.

Professor Minford's passionately held free-market views found much greater favour with the government under Mrs Thatcher's rule. He is a firm believer in the success of the Conservative Government's assault on inflexibility in the labour market. He argues, as a result, that unemployment is far higher than it needs to be to keep inflation under control.

"Policy is far too tight. A zero target for the public sector borrowing requirement is too tight and interest rates are too high." In his last report for the Treasury Panel, he called for tax cuts of pounds 18bn over three years and a full percentage point drop in interest rates. Mr Clarke has delivered pounds 3bn in tax cuts and a quarter point base rate cut.

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