Economists back Alistair Darling over cuts delay

Gavin Cordon,Press Association
Friday 19 February 2010 15:31
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More than 60 leading economists backed Chancellor Alistair Darling today over his decision to delay spending cuts until next year.

In two letters to the Financial Times, they said it could be "positively dangerous" to begin cuts - as the Tories are planning - and would risk tipping the economy back into recession.

The letters are a direct riposte to a letter sent to The Sunday Times by a group of 20 leading economists urging more rapid action to tackle Britain's £178 billion deficit.

One letter organised by Lord Skidelsky, a cross-bench peer and biographer of the economist John Maynard Keynes, accused the authors of The Sunday Times letter of trying to "frighten" the public over the scale of the deficit.

"How do the letter's signatories imagine foreign creditors will react if implementing fierce spending cuts tips the economy back into recession?" they ask.

"For the good of the British public - and for fiscal sustainability - the first priority must be to restore robust economic growth."

The other, organised by Lord Layard, emeritus professor of economics at the London School of Economics, commends Mr Darling's "sensible" plan for reducing the deficit.

"While unemployment is still high, it would be dangerous to reduce the Government's contribution to aggregate demand beyond the cuts already planned for 2010-11," they said.

"History is littered with examples of premature withdrawal of the government stimulus, from the US in 1937 to Japan in 1997. With people's livelihoods at stake, a responsible government should avoid reckless actions."

The signatories to the letters include two Nobel laureates - Joseph Stiglitz and Robert Solow - and five former members of the Bank of England's monetary policy committee, including former deputy governors Sir Andrew Large and Rachel Lomax.

A spokesman for Mr Darling said that the letters belied shadow chancellor George Osborne's claim that there was a consensus among economists on the need for early action to tackle the deficit.

"Once again George Osborne has jumped on the wrong bandwagon. His judgment is wrong and his approach would risk derailing the recovery," the spokesman said.

"It's obvious to most people that government support is still needed until recovery is secured. It's a view shared by most other governments around the world of all political colours."

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