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02 December 2023

Economists urge Britain to reduce deficit faster


Leading economists warned yesterday that Britain lacks a credible plan to cut its budget deficit, in a damaging attack on Prime Minister Gordon Brown's government just months before a tough election fight.

In an open letter to The Sunday Times newspaper, a group of academics and policymakers said that whoever wins the forthcoming vote must cut the deficit faster than Brown's Finance Minister, Alistair Darling, has so far envisaged.

"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," the letter says.

"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."

Darling is set to announce his latest annual budget in March, just weeks before an election which must be held by early June, and is widely expected to take place on May 6.

Britain exited its longest recession on record in the fourth quarter of 2009 with growth of just 0.1 per cent, and the economy is set to be a key electoral battleground between Brown's Labour party and the opposition Conservatives.

The letter, although bipartisan, appears to support Conservative proposals to cut spending faster than Labour.

The letter said the timing of cuts should be "sensitive to developments in the economy" and mindful of harming the most vulnerable, but it said the aim should be to start reducing spending in the 2010-2011 fiscal year.

Among the letter's signatories are Kenneth Rogoff, a former chief economist at the International Monetary Fund; Howard Davies, Director of the London School of Economics and former head of the Financial Services Authority; and Roger Bootle, former chief economist at HSBC.


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