George Osborne “took a large risk with the economy” when he imposed deep spending cuts in 2010, and the resulting slowdown may have cost 5% of GDP, or £1,500 for every man, woman and child in Britain, according to a new analysis of the coalition’s record by the National Institute of Economic and Social Research.
As the general election approaches, NIESR used its quarterly Economic Review to publish assessments of the government’s record, by a series of eminent economists.
Professor Simon Wren-Lewis, of Oxford University, argued that the deficit-cutting policy adopted in Osborne’s “emergency budget” of 2010 was unnecessarily aggressive, particularly since interest rates were already close to zero, making it hard for the Bank of England to offset the slowdown that followed.
“The delay in the UK recovery over the first part of the coalition government’s term is at least in part a result of the government’s fiscal decisions”. The final cost will not be clear for some time, he argued, but, “measured against the scale of how much governments can influence the welfare of its citizens in peacetime, it is likely to be a large cost”.
Using the independent Office for Budget Responsibilities estimates, he argued that GDP may have been reduced by up to 5%, or £1,500 per head.
