Sunday Times economists’ letter does not support Tory policy

The Conservative’s have jumped on a letter by a group of 20 economists in yesterday’s Sunday Times calling for “a credible medium-term fiscal consolidation plan.” But the letter exposes divisions with the academic community but little support for the Tory’s cut-at-any-cost policy.

George Osborne was widely quoted yesterday saying:

“Crucially, these economic experts also say there is a compelling case for starting in 2010 and that there should be independent oversight of the forecasts — two arguments we Conservatives have been making with force for months now.

“It is clear today that the Conservative party is now speaking with the consensus of expert economic opinion and it is Gordon Brown who is threatening the British recovery.”

There are two problems with this statement: the economists did not say there was a compelling case for starting in 2010, and there is no economic consensus on the route ahead.

It was U.S. President Harry Truman who said, “Give me a one-handed economist! All my economists say, On the one hand on the other.” While the Sunday Times letter may “warm Tory hearts,” the left is equally assured by a series of interventions in recent months. On the eve of the pre-Budget report a group of respected economists wrote to the Financial Times saying:

“we urge the Chancellor to resist any temptation to start cutting public spending in 2010-11.”

Left Foot Forward organised its own letter to the Daily Telegraph of 20 economists and economic policy experts:

“we must not risk a “double dip” recession by slashing pubic spending prematurely.”

This followed remarks by IMF Managing Director Dominique Strauss-Kahn who said in November:

“exiting [from stimulus plans] too early is costlier than exiting too late.”

And just last week, Nobel prize winner Joseph Stiglitz called the Tory policy “crazy“.

Beyond the economic debate, the Tories see the letter as an endorsement of their policy. But rather than endorsing cuts in 2010, the letter was fudged:

“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 being equal, for the first measures beginning to take effect in the 2010-11 fiscal year.”

After the news last week that the Germany economy failed to grow in the last three months of last year with the Italian economy once again contracting, there can be little doubt that the world economy remains “fragile.”

And although David Cameron appeared to suggest a fortnight ago that a Conservative government would not make “swingeing cuts” during their first year, Ken Clarke was gung-ho in a Times interview on Saturday suggesting there would be “very drastic cuts”:

“Within 50 days we’ve got to have a credible plan, which is a very short order, so we’re doing as much work as we can in opposition to prepare for what is going to have to be done when we do get in.”

This is the longest, deepest recession anyone alive can now remember. In percentage terms the level of spending cuts we are contemplating is probably [going to] exceed those of any modern government. We are going to have to be much tougher on public spending than Margaret Thatcher ever was.”

There is no nuance from any of the Tory front benchers for being “sensitive to developments”.