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Backing for spending cuts delay Backing for spending cuts delay
(30 minutes later)
More than 60 senior economists have signed two open letters that back the chancellor's decision to delay government spending cuts until 2011.More than 60 senior economists have signed two open letters that back the chancellor's decision to delay government spending cuts until 2011.
The letters say that any measures to trim the budget deficit this year could pull the country back into recession.The letters say that any measures to trim the budget deficit this year could pull the country back into recession.
They are a riposte to the 20 economists who backed the Conservatives' call for cuts this year in the Sunday Times.They are a riposte to the 20 economists who backed the Conservatives' call for cuts this year in the Sunday Times.
Prime Minister Gordon Brown has dismissed the opposition attacks over the state of the public finances. Those economists had argued a lack of a credible plan threatened to push up interest rates and undermine recovery.
"They are using the talk of action on debt to conceal the hard fact that their real position is that they remain wedded, as they have always been, to an ideology that would always make government the problem, and deny people the helping hand that government can be," he told the Progressive Governance Conference in London on Friday. The Treasury recently said it hoped the public deficit - the difference between government spending and the income it receives through taxation and other sources - would stay below £170bn for the current financial year.
Figures released on Thursday showed that the government had to borrow a further £4.3bn in January to help cover the deficit - the first time the government has had to borrow money in January - usually a bumper month for income from tax receipts.
Speaking at a conference in London, Prime Minister Gordon Brown reiterated that there would have to be tax rises and cuts in spending to reduce the deficit.
"We have been crystal clear that we will halve the deficit over the next four years - indeed more than halve it," he said.
"But the vast majority of the increase in our deficit since the global financial crisis hit the UK has been caused by a decline in estimated tax revenue - and so we must redouble our efforts to restore growth and get people back into work," he told the Progressive Governance Conference.
The writers of these letters are in danger of writing themselves out of a job Stephanie FlandersBBC economics editor More reactions from around the webThe writers of these letters are in danger of writing themselves out of a job Stephanie FlandersBBC economics editor More reactions from around the web
"Instead of helping the recovery in our country, Conservative dislike of government, bordering on hatred of government action, would risk recovery now." 'Debate'
Those economists that supported the Conservatives - published in the Sunday Times last weekend- said cuts were needed in 2010 to reassure the markets. The issue of reducing the government's deficit and wider public debts has become a key political battle ahead of the general election.
'No debt crisis' A Conservative spokesman said: "Twenty leading economists, plus business leaders, including Richard Branson, agree with us that the failure to have a credible plan to reduce the deficit threatens to undermine the recovery and push up interest rates.
The Treasury recently said it it hoped the public deficit - the difference between government spending and the income it receives through taxation and other sources - would stay below £170bn for the current financial year. "We are happy to have that debate with the government."
Figures released on Thursday showed that the government had to borrow a further £4.3bn in January to help cover the deficit. Those signing the two new letters in the Financial Times include two Nobel laureates - Robert Solow and Joseph Stiglitz - and five former members of the Bank of England's interest-rate setting committee.
Those signing the two new letters include two Nobel laureates - Robert Solow and Joseph Stiglitz - and five former members of the Bank of England's interest-rate setting committee. Lord Layard, emeritus professor of economics at the London School for Economics and one of the signatories, told the BBC: "You have to remember that our deficit is the lowest among all the G7 countries except Canada," he said. "The idea that there's a debt crisis is quite wrong and we should squash it."
Lord Layard, emeritus professor of economics at the London School for Economics and one of the signatories, told the BBC said it was "essential" the government kept spending and dismissed suggestions that UK could default on its debt.
"You have to remember that our deficit is the lowest among all the G7 countries except Canada," he said. "The idea that there's a debt crisis is quite wrong and we should squash it."
One of the letters, organised by crossbench peer Lord Skidelsky, accused the authors of The Sunday Times letter of trying to "frighten" the public over the scale of the deficit.One of the letters, organised by crossbench peer Lord Skidelsky, accused the authors of The Sunday Times letter of trying to "frighten" the public over the scale of the deficit.
It asks how "foreign creditors will react if implementing fierce spending cuts tips the economy back into recession".It asks how "foreign creditors will react if implementing fierce spending cuts tips the economy back into recession".
"For the good of the British public - and for fiscal sustainability - the first priority must be to restore robust economic growth," it says."For the good of the British public - and for fiscal sustainability - the first priority must be to restore robust economic growth," it says.
The other, organised by Lord Layard, emeritus professor of economics at the London School of Economics, says Mr Darling's plan for reducing the deficit was "sensible".The other, organised by Lord Layard, emeritus professor of economics at the London School of Economics, says Mr Darling's plan for reducing the deficit was "sensible".
"While unemployment is still high, it would be dangerous to reduce the government's contribution to aggregate demand beyond the cuts already planned for 2010-11," it says."While unemployment is still high, it would be dangerous to reduce the government's contribution to aggregate demand beyond the cuts already planned for 2010-11," it says.
'Wrong bandwagon' A spokesman for Mr Darling said that the latest letters showed that shadow chancellor George Osborne had "jumped on the wrong bandwagon".
The issue of reducing the government's deficit and wider public debts has become a political battle ahead of the general election.
A Conservative spokesman said: "Twenty leading economists, plus business leaders, including Richard Branson, agree with us that the failure to have a credible plan to reduce the deficit threatens to undermine the recovery and push up interest rates.
"We are happy to have that debate with the government."
But a spokesman for Mr Darling said that the latest letters showed that shadow chancellor George Osborne had "jumped on the wrong bandwagon".
"His judgment is wrong and his approach would risk derailing the recovery," the spokesman said."His judgment is wrong and his approach would risk derailing the recovery," the spokesman said.