6th June 2011
Forty-seven economists wrote a letter to the Observer newspaper demanding that the Coalition's government change its economic policy, claiming the UK's finances are too unstable to withstand the spending cuts.
The letter says: "Recent economic figures have shown the Government urgently needs to adopt a plan B for the economy. The Government's strategy is likely to result in a lot more pain and a lot less gain.'
An accompaning story in the Observer reports that experts – including two former Whitehall advisers and two signatories of last year's high-profile letter backing the cuts aimed at reducing the UK's budget deficit – have "profound concerns about the direction of Treasury policy".
It reports: "Since the chancellor laid out his plans to balance the books by the end of the parliament in his "emergency budget" a year ago, the outlook has deteriorated markedly. Growth has gone flat over the past six months and a slew of dismal data has raised fears that the UK could be sliding towards a double-dip recession, as the US recovery wanes and the Greek debt crisis rattles the eurozone."
However, in The Telegraph other economists were quick to leap fo the defence of the Coalition's austerity plans
They argued that abandoning the fiscal plan now would lead to even greater economic damage.
The Telegraph notes that the row has erupted as the International Monetary Fund – which last year backed the Coalition's "strong and credible" plan to shrink the budget deficit – looks set to urge the Government to change tack.
The IMF is expected to say that the UK Government is cutting too deep and too fast.
Britain's growth prospects have been repeatedly downgraded in recent months, by bodies including the Bank of England, the Organisation for Economic Co-operation and Development and the Government's own fiscal watchdog.
However, leading economists argued that the UK is still in growth mode and that the risks around reducing the fiscal consolidation efforts – including £81bn of cuts over four years – outweigh any benefits of changing tack.
On This Is Money, the Government said it would be standing firm.
Treasury Chief Secretary Danny Alexander dismissed the letter saying: 'We're not going to help the recovery by abandoning the rescue mission."
The latest coverage is via the Guardian politics blog Andrew Sparrow writes that George Osborne defended the cuts during an interview with BBC News.
On the Telegraph comment boards, erewhon claimed the 'row' had been stirred up by the media. "This article is part of the spin: The original story was a group of economists urging the government to have a 'plan B'. Someone has spent time since yesterday finding other economists to support 'plan A', giving the Telegraph the chance to run the headline 'Economists urge ministers to stand firm' rather than 'economists say Osborne is an idiot'."
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