New figures cast doubt on George Osborne's claims that Coalition austerity programme has been vindicated

Tax rises and spending cuts have made the economy 3 per cent smaller

George Osborne’s claim that his austerity programme has been vindicated has been thrown into doubt by new research which suggests that tax rises and spending cuts have made the economy 3 per cent smaller.

The Chancellor argued earlier this week that the economy’s strong recovery since the beginning of the year had “decisively” ended the debate over whether he had imposed too much austerity too quickly.

But Alan Taylor and Oscar Jorda, two respected and independent US economists, have argued that more than half of the economy’s growth shortfall relative to the Office for Budget Responsibility’s (OBR) forecasts of three years ago can be ascribed to the Coalition’s fiscal measures.

In June 2010 the OBR, the Government’s independent forecaster, estimated that the economy would expand by a healthy 7 per cent by the end of 2013. But, despite this year’s strong pick-up in growth, the UK’s GDP is set to fall well short of this expansion by the end of the year.

Mr Taylor and Mr Jorda argue that the Chancellor’s policies – which include cutting public investment and raising VAT to 20 per cent – are responsible for at least half of the shortfall, equal to around 3 per cent of GDP.

They added that the negative impact of the Chancellor’s austerity could be greater still because, since 2009, the Bank of England has pushed interest rates almost as low as they can go. They said this could have exacerbated the impact of the Chancellor’s spending cuts on the weak economy.

“If so, then the vast majority of the difference between the actual UK recovery and the forecast could be attributed to the Coalition’s austerity policy choices,” they said.

Echoing the words of John Maynard Keynes, the pair, who are both affiliated to the University of California, concluded: “Generally, in the slump, austerity prolongs the pain, much more so than in the boom”.

At the end of the second quarter of 2013, the British economy was still more than 3 per cent smaller than it was before the recession began in early 2008. Other advanced economies, including the United States and Germany, regained their lost ground from the recession some time ago. Between 2011 and the end of last year the economy was stagnant, prompting the Labour Party to accuse the Coalition of choking off growth with  its policies.

The Treasury tonight dismissed the Taylor/Jorda research and pointed to the verdict of the OBR last year, which found that the shortfall in growth relative to its 2010 forecast was more likely to be due to a spike in the global oil price and the weakness of the eurozone, rather than the scale and scope of the Coalition’s fiscal consolidation.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Customer Service Advisor

£18000 - £22000 per annum: Recruitment Genius: This company has won the award ...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE: SThree: SThree are a global FTSE 250 business...

SThree: Trainee Recuitment Consultant

£18000 - £23000 per annum + OTE: SThree: SThree are a global FTSE 250 business...

Recruitment Genius: Lettings and Sales Negotiator - OTE £46,000

£16000 - £46000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn