A group of leading economists has warned that the Government was putting Britain’s economic recovery at risk without a “credible” plan for cutting its massive budget deficit.
An array of eminent academics and policy-makers put their names to an open letter urging that borrowing had to be reduced more quickly than Chancellor Alistair Darling set out.
They urged whoever won the forthcoming general election to present a “detailed” strategy to wipe out the underlying, structural deficit within five years.
There was a “compelling case” for cuts in 2010/11, they added.
Shadow chancellor George Osborne cited the intervention as proof that Prime Minister Gordon Brown’s argument for dealing with the deficit had “collapsed”.
The Tories promised to go “further and faster” in dealing with the £178 billion deficit than Labour’s plans to halve it within four years. They want to start cutting in 2010.
The letter, to The Sunday Times, is signed by four former members of the Bank of England’s monetary policy committee (MPC).
Other signatories include a former permanent secretary to the Treasury and Cabinet Secretary, and ex-chief economists of the International Monetary Fund, the Bank of England and HSBC.
They write: “In the absence of a credible plan, there is a risk that a loss of confidence in the UK’s economic policy framework will contribute to higher long-term interest rates and/or currency instability, which could undermine the recovery.
“In order to minimise this risk and support a sustainable recovery, the next Government should set out a detailed plan to reduce the structural budget deficit more quickly than set out in the 2009 Pre-Budget Report.
“The exact timing of measures should be sensitive to developments in the economy, particularly the fragility of the recovery.
“However, in order to be credible, the Government’s goal should be to eliminate the structural current budget deficit over the course of a Parliament, and there is a compelling case, all else equal, for the first measures beginning to take effect in the 2010/11 fiscal year.”