A group of 100 economists called on U.K. Chancellor of the Exchequer George Osborne to reverse cuts to public services and benefits and introduce a financial transactions tax to pay for investment in jobs.
Osborne’s “Plan A” isn’t working and he should hold an emergency budget to change course, economists including Cambridge University’s Ha-Joon Chang and Professor Tony Atkinson of Nuffield College, Oxford, said in a letter to the Observer today in support of a report by the Compass pressure group.
“Wave after wave of economic figures from HM Treasury, national and international economic institutions such as the OECD, the IFS and the IMF have all concluded that the British economy is faltering,” the letter said. “We urge the government to adopt emergency and commonsense measures for a Plan B that can quickly save jobs and create new ones.”
The economy effectively stagnated in the nine months through June as government spending cuts and soaring food and fuel prices eroded household incomes at the fastest pace since the 1970s. Unemployment reached a 17-year high in the three months through August and consumers are cutting back their spending.
Gross domestic product rose 0.3 percent in the third quarter compared with a 0.1 percent increase in the second quarter, according to the median of 36 forecasts in a Bloomberg News survey. The Office for National Statistics will publish data on Nov. 1 in London.
The U.K. should protect jobs in the public sector by reversing spending cuts, focus quantitive easing on creating jobs in renewable energy and home insulation, and increase benefits to people on low incomes to enhance their spending power, the economists said. The moves would in part be paid for by a tax on financial transactions, they said in the letter.
“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,” a Treasury spokeswoman said in an e-mailed statement. “The Government’s strategy to deal with the country’s debts and its plan for growth are essential for strong and sustainable growth.”
The next phase of the government’s plan for growth will be announced in November, the spokeswoman said.