A group of eminent economists and politicians have come together to insist that cuts to the government’s budget deficit take place as soon as the general election has finished.
In a letter a to the Sunday Times, organised by Tim Besley a professor of economics at the LSE, the twenty signatories warned that the UK’s budget deficit was the largest in our peacetime history and among the developed world.
“The government’s goal should be to eliminate the structural current budget deficit over the course of a parliament, and there is a compelling case, all else being equal, for the first measures beginning to take effect in 2010-11 fiscal year,” the letter said.
The letter has been seen as an attack on Labour economic policies, although the Treasury said Alistair Darling, chancellor of the exchequer, has outlined a plan in the pre-budget report to halve the deficit over the next four years.
George Osborne, shadow chancellor, said it represented “a decisive moment in the economic debate” and that “Gordon Brown’s argument on the deficit has collapsed.”
The Labour peer Lord Desai was one of the signatories to the letter, although he insisted he was not playing party politics and that his involvement was due to his concern over the issue.
Shadow business secretary Ken Clarke went as far as suggesting that the Conservatives would have to be even tougher than Margaret Thatcher on spending cuts over the next four years.
But the Conservatives have shown signs of backtracking on plans to curtail government spending and party leader David Cameron has categorically ruled out “swingeing cuts”.
Vince Cable, Liberal Democrat Treasury spokesman said recently: “I understood until a day or so ago that the reason the Conservatives were different was that they were promising very rapid and severe cuts immediately. Now, they seem to be retreating from that.”
Fitch, the ratings agency, has warned that the UK is vulnerable and could lose its AAA rating if urgent action to reduce the budget deficit is not taken.