Professors urge new economic policy


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The Independent Online

A change of economic policy is "desperately required" from the UK Government, according to a group of leading economists.

Four expert figures, including Professor David Blanchflower, a former member of the Bank of England's Monetary Policy Committee, and Nobel Prize winner Professor Sir James Mirrlees have called for increased capital investment to help stimulate economic growth.

In a letter to Scottish newspapers the group stressed "the importance of having the courage to admit the need for change when it is so desperately required".

As well as being signed by Prof Sir James, of Cambridge University, and Prof Blanchflower, a professor at Dartmouth College in the US who also holds a post at Stirling University, the letter is signed by Professor Andrew Hughes Hallet of St Andrews University and Professor Drew Scott from the University of Edinburgh.

It comes on the day Prime Minister David Cameron pledged to get the planning system "off people's backs" and revive the economy by easing restrictions for homes and businesses.

Treasury funding of £300 million has been found to help provide up to 15,000 such properties and bring 5,000 empty homes back into use, Downing Street said.

New legislation will provide Government guarantees of up to £40 billion of major infrastructure projects and up to £10 billion of new homes, including a move to guarantee the debt of housing associations and private sector developers.

The four professors said capital investment is needed, arguing that "only through this form of fiscal stimulus can the UK hope to create a virtuous cycle of jobs, growth and confidence".

The Scottish Government has repeatedly called for more capital funding to be pumped into major infrastructure projects in a bid to revive the economy.

Capital spending north of the border was accelerated following the 2008 recession, with First Minister Alex Salmond and other Scottish ministers repeatedly urging Westminster to adopt a similar "plan MacB" approach.

Prof Sir James and Prof Hughes Hallet are members of the Scottish Government's Council of Economic Advisers.

In their letter the four professors point out that the latest Scottish GDP figures show economic growth fell by a "marginal" 0.1% in the first three months of this year, compared with a fall of 0.4% for the UK as a whole.

They said: "We support the First Minister's repeated calls for UK Government capital investment to stimulate, not just construction, but by extension broader economic growth. We argue that only through this form of fiscal stimulus can the UK hope to create a virtuous cycle of jobs, growth and confidence."

The professors added: "We have no view on what a change in policy is called - Plan A+, Plan B, Plan MacB or anything else. We simply stress the importance of having the courage to admit the need for change when it is so desperately required."

Announcing today's major planning and housing package, the Prime Minister said: "This Government means business in delivering plans to help people, build new homes and kick-start the economy.

"We're determined to cut through the bureaucracy that holds us back. That starts with getting the planners off our backs. Getting behind the businesses that have the ambition to expand. And meeting the aspirations of families that want to buy or improve a home."

The package of measures would mean an extra 70,000 houses and 140,000 jobs, he insisted.

But he also cautioned that it was a "a tough economic environment" and the Government could not turn "UK plc" around by itself.

A Scottish Government spokeswoman said ministers welcome the intervention from the professors.

Meanwhile, Scottish Finance Secretary John Swinney again urged Chancellor George Osborne to provide extra cash for capital spending.

"I am glad the Chancellor is in Scotland today to see the action the Scottish Government is taking to support growth and jobs, and the contrast with the damage his Government's economic policies are inflicting on the Scottish economy," Mr Swinney said.

"This Scottish Government and our agencies are working hard to support economic recovery by investing every penny we can in capital infrastructure, building houses, schools and roads to create jobs, and I am asking the UK Government to do the same."

The "urgent case for action" was highlighted by the OECD's forecast that the UK economy will shrink by 0.7% this year, Mr Swinney said.

"George Osborne first set out his Government's plans for the economy two years ago. Since then the UK economy has returned to recession and it is widely accepted that it is time for George Osborne to change tack.

"It is time for George Osborne to provide additional capital spending so that we in Scotland can fund shovel-ready projects that will have an immediate impact through promoting growth and creating jobs.

"Additionally, he needs to take action to ensure businesses can access the funds they need to flourish and to boost consumer confidence by tackling rising fuel and energy prices and supporting families instead of punishing them."

He criticised Mr Osborne's "failure" to invest in growth: "The state of the economy is the single most important issue for Scottish businesses and families. I hope that my calls are answered and do not, yet again, fall on deaf ears."