Daily View: When to cut spending?
Letters from 60 economists published in the Financial Times support Alistair Darling's decision to delay spending cuts until 2011. This follows a letter from 20 economists to the Sunday Times who urged a spending cut now and the first January on record where government spending was bigger than revenues. Commentators consider what this will mean for the election.
Economist Lord Skidelsky argues on the Today programme that while spending cuts may be good for the market, it was the market "that got us into the present pickle":
"We need to take into account that the well-being of our people is not necessarily the same as the well-being of bond traders."
Also on the Today programme, former trade Minister Lord Jones argues that to prevent a run on the pound and preserve the UK credit rating, we need clear policies:
"At the end of the day, markets want to see that elected leaders and their advisors such as economists have a plan and stick to it."
The Times editorial urges cuts, saying that there is nothing to show for existing spending:
"It might have been tolerable to have spent all this money, dug the country into this position, if it had achieved greater social cohesion and stronger communities. Yet often the money produced the opposite - it sponsored the social breakdown that it was supposed to combat."
The Daily Mail editorial says banks also play a part in the story, as bank loans to businesses must increase:
"Our saving grace - for the moment - is that the markets believe that Britain will cut its deficit after the election.
But if an incoming Government does find the courage to cut public spending, then we will be even more reliant on private sector entrepreneurs to prevent the dreaded double dip recession."
Phil Hendren who blogs as Dizzy Thinks says the two sets of economists not agreeing with each other tells us more about economists than whether there should be spending cuts and politics:
"Economics is a pseudo-science based on inherent prejudicial bedrock assumptions, or more cynically, and accurately put, the leading economists of the world don't really know their arses from their elbows but they'll have a good fight with each other about which part of their body they should sit on."
Left-wing blogger Sunny Hundal says in Liberal Conspiracy that it's a bad day for Tory policy:
"The two letters now put Conservative economic policy at odds with the consensus that the economy should be allowed to recover before the deficit is reduced."
Conservative MP John Redwood argues in his blog that 60 economists can still be wrong but thinks that voters might agree with the 20 economists in the Sunday Times who urged a cut in spending now:
"There are signs of hope in the reaction. The fact that January is usually a month when revenues exceed spending is just an excuse. I guess what is happening is that the British establishment is coming round to the view of the 20, not the 60 economists. Lots of 'serious' people now agree that the deficit is too large."
Links in full
Sunday Times |UK economy cries out for credible rescue plan
Sunny Hundal | Dizzy thinks | Economists argue with each other
John Redwood | 60 economists can be wrong
Phil Hendren | Liberal Conspiracy | Ouch! Two sets of economists slam tory cuts
Times | £122,400,000,000
Daily Mail | Banks must help us avoid Greece's fate
BBC Today Programme | We Need clear concise policies