Osborne Loses Backing of Economists on Cuts, New Statesman Says

U.K. Chancellor of the Exchequer George Osborne has lost the support of a group of economists who wrote an open letter before the last general election supporting his fiscal squeeze, the New Statesman reported.

Only one of the 20 economists who put their names to the letter in February 2010 “was willing to repeat his endorsement,” the London-based magazine said in a statement today. Nine called on Osborne to abandon his opposition to fiscal stimulus and promote growth through tax cuts and higher infrastructure spending, while others declined to comment or were not at work.

Osborne has resisted demands to ease his deficit-reduction program, saying the cuts have helped push down borrowing costs and insulated Britain from the euro-area debt crisis. At the time the letter was published, three months before Prime Minister David Cameron’s coalition took office as the then Labour government was pledging more spending to aid the economy, Osborne said the endorsement of his plans was a “stunning development.”

Among the economists who signed the 2010 letter, which appeared in the Sunday Times newspaper, Capital Economics Ltd. Managing Director Roger Bootle said he would “alter the plan” and stop cuts to public investment, according to the New Statesman.

David Newbury, emeritus professor of economics at Cambridge University, said while it was necessary to cut current spending, “given the poor state of Britain’s publicly funded infrastructure and the looming recession, the necessary counterpart is to increase public investment expenditure even if this worsens the short-run public deficit.”

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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