100 leading economists tell George Osborne: we must turn to Plan B

[ttosca]

Chancellor must change strategy and enact emergency measures to avoid a double-dip recession, experts say

A hundred leading economists have made an impassioned call for the government to step back from the brink of a new economic crisis and back a Plan B to save existing jobs and create new ones, amid growing fears of a double-dip recession.

In a letter to the Observer, the umbrella group of distinguished experts from across the country argue that the chancellor must rethink his strategy and enact emergency measures to kickstart growth and save the UK from growing unemployment and a further fall in living standards.

Condemning the intransigence of the chancellor, George Osborne, as he pursues the coalition government's austerity programme, the economists write: "It is now clear that Plan A isn't working. Wave after wave of economic figures? have all concluded the British economy is faltering." And they warn: "Doing nothing is not an option."

They call on the government to consider a host of measures proposed by a body of academics and economists brought together by the left-leaning thinktank Compass. The proposals, in a manifesto entitled "Plan B: a good economy for a good society", will be launched in London on Monday. They include:

■ An immediate halt to cuts, to protect jobs in the public sector.

? A new round of quantitative easing to finance a "Green New Deal" to create thousands of new jobs.

? Benefit increases to put money into the pockets of those on lower and middle incomes and give a boost to spending.

? A financial transaction tax to raise funds from the City to pay for investment in transport, energy and house building.

The call for a new approach comes as the UK economy's sluggish recovery shows signs of stalling altogether amid the fallout from the eurozone crisis. Consumer spending has fallen as wages fail to keep up with inflation, and low to middle-earners have endured the biggest squeeze on living standards for decades.

Ministers are bracing themselves for further bad news this week with the publication by the Office for National Statistics (ONS)of the latest growth statistics. It is anticipated that GDP will have grown by just 0.3% between July and September, representing a modest increase on the 0.1% in the previous quarter.

The letter from the economists, including former European Investment Bank consultant Dr Ha-Joon Chang urges the government to engage with new ideas on stimulating growth, and warns the chancellor that his policies may push the country into further deficit rather than erase the national debt.

It states: The UK jobless total is now at its highest for over 17 years, while growth has all but stalled. Despite the increasing risk of a double-dip recession, which will inevitably result in even greater unemployment and falling living standards, the government refuses to change course. Indeed if the government persists with Plan A the deficit could rise not fall. It's time for a Plan B.We urge the government to adopt emergency and commonsense measures for a Plan B that can quickly save jobs and create new ones. An emergency recovery plan could include reversing cuts to protect jobs in the public sector, directing quantitative easing to a green New Deal to create thousands of new jobs, and increasing benefits to put money into the pockets of those on lower and middle incomes and thus increase aggregate demand. This could in part be paid for by the introduction of a financial transactions tax.Last night, a Treasury spokesman said the next stage of Osborne's plan would be announced next month. "The government has always said that the recovery would be challenging, and the current global uncertainty, in particular in the eurozone, is making it more so," he said. "The government is implementing the plan for growth as planned, including a reduction in business tax, reducing red tape and reform of the planning system." the source added, saying the next stage of the government's plan would be outlined in November when the chancellor delivers his autumn statement to the Commons.

www.guardian.co.uk/politics/2011/oct/29/george-osborne-plan-b-economy

We need to cut harder. More Govt spending is not the answer. Never has been. See Greece for details. Problem is the cuts are in the wrong place.

Of course! When something isn't working, do it twice as much!

More public borrowing and more spending got us into this mess. We definitley should not do more of that.

To do so would be sheer economic madness - or Keynsianism as it is also known.

How are the economies of Greece and the UK similar?

The economies of Greece and the UK are not similar at all.

The main warning in the article is that continuing with the current policies is not only not working, but will actually make the deficit worse. Fewer people in work = reduced tax receipts and higher benefit payments = higher deficit. So how can more cuts be the answer?

And the sad thing is is that Osbourne will no doubt ignore this and carry on regardless.

People aren't spending as they have no money, reduncies increase and business go bust. It just spirals downwards and downwards.

Well, quite, scarletbanner. I'm extremely dubious of anyone who draws any parallels with Greece at all - it is just a bit too Daily Mail.

If Greece had all it's debt paid off tomorrow, it would still have a problem as it is paying out then it takes in receipts. It's a bit like earning £250 a week and paying out £300 a week.

We could start spending again but all we would do is push the problem further down the line, were the debt would be bigger, and the cuts even deeper. Yes ideally we should be spending to invest but that would mean higher taxes for everyone and every company. Yippee some might say, let's tax the fat cats (about 0.5% of our population). But if I was a company boss who wants to make a profit ( oo that's a dirty word these days) then I would move abroad and hey presto, not pay high UK taxes.

It's a tough one and the world is in a very tough place at the moment and another recession is most certainly on it's way. UK plc is just about keeping it's head above the water at the moment and I'd rather be struggling in this country than in say countries like the USA, Greece, Ireland etc were the situation is much much worse.

By the way I hate the Daily Mail - scaremongering shit!

But when there's a 100 leading economists telling us to do something else there must be something in that? I see the arguement that its just hiding the problem but they must know what they're talking about?

They're too busy attacking benefit claimants with their ideals and have completely forgotten about the state of the economy. 'Tis much more fun for them to see the poor squirm.

Oh yes crazynanna they get a positive THRILL out of it.........the freaks.

Yes Glasnost...it gives ShinyDave a permanent hard on.

Its going to get worse when a lot of people lose their Child Benefit in April.

I don't think they're planning on cutting child benefit for HR taxpayers until 2013. (And I still think there's a chance it won't happen even then) but I see where you're coming from. Things aren't going to get better until Georgie Peorgie implements a Plan B.

It is true that Greece is not like the Uk - but in only one respect. We are not quiet as bad as Greece yet which gives us time to do something about the situation. If we don't take that chance we will end up like Greece.

I read an interesting piece today from an economist at Societe Generale that analysed the debt sustainability of all advanced economies and the basic conclusion was that in the long run all the advanced economies are on an unsustainable path of promising levels of public sector pay, pensions and social security that the growth rate of their economies will never be able to deliver.

Up until now the gap between what is being prtomised and what the Uk is earning and can sustain has been made up by taking on more and more public debt. Eventually that has to stop and austerity is either done voluntarily or imposed by the bond market. Greece is having it imposed by outsiders via the bond market but the UK Govt has a chance to do it in a fair and managed way so that the most vulnerable do not suffer.

If we let the bond markets do it for us the cuts will be brutal and across the board without regard for basic public health, welfare and education.

What would you like to see happen in Plan B?

If he goes down that route eventually the deficit and restructuring(cuts) required will be even harsher.

And thank you MoreBeta you put it better than me and I will read that article.

This isn't about politics, this is about economics and the mess we are in. I am very concerned that Europe has had to go China to borrow money. That's going to be a regrettable move in the long run.

I'm open-mouthed at the proposition that the cuts are being imposed so that the poor and vulnerable do not suffer. They are precisely the people who are suffering the most.

Not political? How is it 'not political'? The banks were ruined, the govt gave them our money, that money was used to reward the people who ruined them and we're now told the solution is 'Universal Credit' under which disabled children will lose at least £100 a month. Not political? Not human. Get a grip.

Agree with aliceliddell, it is political.
Politics (from Greek πολιτικός, "of, for, or relating to citizens").

Economics and economic management or mismanagement is also political. The EU fiscal union is not just economic, but also political.

'If we let the bond markets do it for us the cuts will be brutal and across the board without regard for basic public health, welfare and education.'

There will be some people who would prefer that politically, so that they can wash their hands of the blame.

Maximising publicity and making capital out of the directors' pay figures is also political.

Practically everything is political.

Austerity is part of the big picture, and the big picture is also political. Austerity and global warming, "limited" resources etc. are all paret of teh big picture, and are all political.

'πολιτικό&#962'

Now I know why they say "it's all Greek to me"

Good god, there is so much wilful blindness on the Right.

I take it you are referring to this statement

"I hate the Daily Mail - scaremongering shit!"

I have to say that I agree with you entirely.