The revolt by the same experts whose support for the Tory economic strategy was a pivotal moment in the pre-election debate in 2010 will be acutely embarrassing for the Chancellor, reports The Telegraph. He is already facing calls from institutions such as the International Monetary Fund and employers body the CBI to take action on growth in the wake of the double-dip recession.
Only one of the 20 economists who put their names to an influential letter in February 2010 said he continue to have faith in the Chancellor. Asked by the New Statesman whether they now regretted signing the supportive letter, nine urged Mr Osborne to change course and promote growth through tax cuts or higher spending on infrastructure. The other 10 failed to comment.
Since the original, pro-austerity letter was published, the UK economy has stagnated. In the past nine months alone, it has shrunk by 1.4pc and is still 4pc smaller than its pre-recession peak. Low growth is undermining the Chancellor’s deficit reduction goal, with several forecasters predicting borrowing will rise this year despite the £18bn of planned austerity.
Of the signatories, Roger Bootle, managing director of Capital Economics, and Danny Quah, professor at the London School of Economics, said they had changed their minds. Seven others, including former Bank of England rate-setter Tim Besley, who organised the letter, either called for more infrastructure investment or failed to repeat their endorsement for the Chancellor.
Two years ago, Mr Osborne declared the letter “a decisive moment in the economic debate in Britain”. At the time, its recommendations were a virtual blueprint of future Coalition policy, with proposals to eliminate the structural budget deficit within five years and cut spending rather than raise taxes.