George Osborne's Plan A 'putting recovery at risk'

Published on 05/06/2011 18:47

GEORGE Osborne was under pressure to rethink his economic policies after leading economists voiced their fears over the coalition's growth plans.

Meanwhile, shadow chancellor Ed Balls challenged Mr Osborne to produce a "Plan B" for economic recovery, saying disappointing figures, revealed last week, showed the government's strategy to revive Britain's economy was faltering.

More than 50 left-leaning economists said the pace of the government's deficit reduction campaign was putting economic recovery at risk.

In a letter published yesterday, the group said the government's "breakneck" austerity drive was self-defeating because weaker growth would take its toll on government tax receipts. "Recent economic figures have shown the government urgently needs to adopt a Plan B for the economy," it said.

Jonathan Portes, director of the National Institute of Economic and Social research, said: "You do not gain credibility by sticking to a strategy that isn't working."

Pointing to the recent slowdown in growth, he said: "It isn't just about the international environment, it's because of the strategy the government has followed."

Meanwhile, Mr Balls said: "Confidence is down, and we are now seeing week by week more evidence the economy is stalling."

He said Labour would cut spending and increase taxes, but slower than the government.

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"The deficit has got to come down, there's no argument about that," said Mr Balls.

"There's no argument there have to be tax rises and some spending cuts. The question is the pace at which you go.

"If you go at a balanced and steady way, the economy recovers, more people are working and paying taxes - that helps get the deficit down. If you go too far and too fast, the danger is it makes it harder."

The government has pledged to eliminate the deficit by 2015, while Labour went into last year's general election planning to cut it by half.

But, speaking yesterday, Mr Balls repeatedly refused to say how much Labour would borrow to fund greater short-term spending to spark growth.

Pressed for specific figures on how Labour would boost growth, he said: "What I can't do now I'm no longer in the Treasury, without seeing all the detailed tax numbers from HM Revenue and Customs, is to tell you exactly where we would be now.

"What I can do is say to you a year ago, when we were in government, borrowing came in 22 billion lower than expected because the economy had grown and unemployment was falling," he added.

"The economic impact of our plans would be better for the economy because we would be reducing borrowing but at a steadier pace.He (Mr Osborne] is going too fast and it's not working."

Meanwhile, Foreign Secretary William Hague defended the government's economic recovery plan and blamed former prime minister Gordon Brown for Britain's record budget deficit.

Mr Hague said: "The harsh truth is that Gordon Brown did not leave this country with the luxury of a Plan B or a different economic strategy.

"We have to get down the debt he left, control the deficits he left and if we wavered from that for a moment then economic confidence would be reduced, the confidence of the financial markets would be very severely affected.

"It is vital to continue the course we have started."