Ex-Cabinet Office chief economist: slower cuts are “common sense”

The head of an independent economics think tank has raised serious questions about the rationale for the Government’s rapid spending cuts. Jonathan Portes – who resigned recently as chief economist of the coalition’s cabinet office to take over as Director of the National Institute for Economics and Social Research - writes in this week’s New Statesman that a longer deficit reduction period “is not only feasible, but sensible and prudent”.

After a summer of riots and collapsing media empires, the economy has quickly returned as the major news story. Figures in the last fortnight show that consumer confidence continues its downward slide, unemployment is on the rise, the number of young people out of employment, education and training (NEETs) is at a new high, export performance is faltering, and Britain is bottom of the growth league table. The only silver lining is that confidence in manufacturing is rising.

Against this backdrop, Jonathan Portes uses the economics essay in the New Statesman to critique three of the arguments used by David Cameron to justify closing the fiscal deficit within four years rather than eight. With historical evidence to support his arguments, Portes writes that the size of the UK debt, the rising debt interest bill, and the threat to confidence were all straw men used by Cameron, Clegg, and Osborne to justify their preferred policy.

Referring to attempts soon after the formation of the coalition to liken Britain’s economic performance to that of Greece, Portes writes:

“Cameron, George Osborne and Nick Clegg repeatedly likened the UK to Greece, even though no one with even a cursory knowledge of Greece’s economic position thought that such a comparison made any sense at all.”

He ends with a stinging rebuke to the Chancellor:

“Stretching out the fiscal consolidation, and moderating some of the front-loaded spending cuts, is not only feasible, but sensible and prudent. In an op-ed piece published in the Daily Telegraph on 8 August, Osborne described those of us who share this perspective, including not only Krugman but also his fellow Nobel laureates Amartya Sen, Joseph Stiglitz and Christopher Pissarides, as being “on the outer fringes of the international debate”.

“Embarrassingly for him, a few days later, we were joined by the new managing director of the IMF, Christine Lagarde, who argued in the Financial Times of 16 August that “there is scope for a slower pace of consolidation combined with policies to support growth”. This argument is neither radical nor old-fashioned Keynesianism, nor is it in any way unorthodox. It is just standard, common-sense macroeconomics; or, more simply, just common sense.”

But despite calls from left and right for a Plan B, the Chancellor appears stubbornly unwilling to budge.

http://twitter.com/matt_cav_/status/106633906991792129 Matt Cavanagh

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/politicalplanet/status/106635452966125568 Political Planet

Former Coalition economic adviser: slower cuts are “common sense”: Think tank boss, Jonathan Portes – who resign… http://t.co/oo5mmNa
http://twitter.com/shamikdas/status/106635947948523521 Shamik Das

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/labourreddish/status/106636585491107840 Labour for Reddish

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/therightarticle/status/106638159592431616 Michael

Former Coalition economic adviser: slower cuts are “common sense” l Left Foot Forward – http://j.mp/p266bm
http://twitter.com/sijj786/status/106638894556131329 sajj

Former Coalition economic adviser: slower cuts are “common sense” l Left Foot Forward – http://j.mp/p266bm
http://twitter.com/evilc154/status/106640215132741633 Clive Burgess

Former Coalition economic adviser: slower cuts are “common sense” l Left Foot Forward – http://j.mp/p266bm
http://twitter.com/barsacq/status/106640676078370816 Richard McCarthy

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/nickdesouza/status/106643707171835904 Nick George de Souza

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/ns_mehdihasan/status/106647035175903232 Mehdi Hasan

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/emmadentcoad/status/106648165872177152 Emma Dent Coad

Former Coalition economic adviser: slower cuts are “common sense” l Left Foot Forward – http://j.mp/p266bm
http://twitter.com/dis_ppl_protest/status/106650478464610304 DPAC

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/labour52rose/status/106650530113265664 Alex Braithwaite

RT @leftfootfwd: Former Coalition economic adviser: slower cuts are "common sense" http://t.co/kHPrzBg
Nick

What do you think would happen if Osborne stood up and said he was switching to Plan B as economic growth was much weaker than expected and the government would need to borrow billions more.

My guess ? Bond yields would rise and sterling would fall. The impact of sterling falling would push up inflation as the price of petrol, heating oil and food all rose. How would this possibly benefit the economy as a whole ?

As it happens Osborne did allow some leeway in his deficit reduction plan, and looking at areas that the government has u-turned on (from forest sell offs to failure to close quangos) I suspect there is fairly significant slowing of Osborne’s original deficit targets (to take account of weaker global economy and impact of global inflationary pressures).
http://twitter.com/iamfatface/status/106651720536424448 facemusic

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/jonslater74/status/106653531032924161 Jon Slater

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/akatwatford/status/106655510270459904 CllrAsifK

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
http://twitter.com/davidward81/status/106656174539153408 David Ward

RT @leftfootfwd: Former Coalition economic adviser: slower cuts are "common sense" http://t.co/izoevgb
http://twitter.com/syzygysyzygysue/status/106693855453253632 Sue Davies

RT @leftfootfwd: Former Coalition economic adviser: slower cuts are "common sense" http://t.co/qJlKxLa
http://twitter.com/monsrobin/status/106705452636708864 Ben Mitchell

RT @leftfootfwd: Former Coalition economic adviser: slower cuts are "common sense" http://t.co/epvThxL
http://twitter.com/tonybraisby/status/106743714952642560 Tony Braisby

RT @leftfootfwd: Former Coalition economic adviser: slower cuts are "common sense" http://t.co/HQsf8Hh
Anon E Mouse

Will Straw – With the chancellor spending more than the last Labour government where are these cuts?
http://twitter.com/k_heron/status/106788882321911808 Keith Heron

Former Coalition economic adviser: slower cuts are "common sense" reports @wdjstraw http://t.co/IByVrtU
Tom White

Try higher education, you dopey troll.
Ed’s Talking Balls

Remind me again, Tom White, who commissioned the Browne Review and, while we’re at it, were Labour not committed to implementing its findings?
http://twitter.com/jmulligan/status/106835674786832384 jmulligan

RT @leftfootfwd: Ex-Cabinet Office chief economist: slower cuts are "common sense" http://t.co/PQ9KkZw
Leon Wolfson

Labour screwed up on higher educational policy in a major way, the Browne review has sealed the fate of it in this country. As I’ve said elsewhere, if you pay £9k/year anywhere but Oxbridge, you’re too stupid to belong in the University system. Not that anyone will fail a degree as long as they’re breathing, now.

@2- All over the place. Simply because they’re pouring cash down the rabbit hole on their pet projects doesn’t mean they’re not eviscerating the social structure of this country at the same time.