Chancellor George Osborne, staying the austerity course. Photo credit: Paul Toeman
Chancellor of the Exchequer George Osborne has admitted that his already low expectations for UK economic growth were too optimistic, but hat he is also adamant that the government’s austerity measures are the best way to tackle the ongoing recession.
“This is not a normal economic recovery,” Osborne said in a speech to bankers in the City of London that was reported by The Huffington Post UK. He blamed the UK’s huge deficit – “an overhang of debt” – for making the journey out of recession “slower and choppier” than usual. But despite acknowledging that full recovery was a long way off, the Chancellor stayed firm on his course of deficit reduction and spending cuts, claiming that it meant the UK was “ahead of the curve” and that by resisting a course correction “we can remain masters of our own destiny.”
- Deficit reduction instead of growth? Osborne’s reaffirmation of his single-minded dedication to deficit reduction has met with some criticism, even from the Tory press. In The Daily Telegraph, Damian Reece questioned whether reducing the deficit was enough to stimulate growth. Referring to Osborne’s “ahead of the curve” claim, Reece commented that “a fair criticism is that [the government] has not yet been ahead of the game on growth.” Deficit reduction measures, Reece argued, “have yet to create the thrust needed to push the economy forward,” and cannot stave off a growing economic pessimism “that a growth policy must reverse before it’s too late,” he wrote. Interviewed in The Times, the founder of the world’s biggest bond fund offered similar advice to the Chancellor. Bill Gross, manager of PIMCO, suggested that a “mid-course correction” of Osborne’s fiscal plans would give the UK economy a much-needed boost. “The economy in the UK is worse off than it was when the plan was developed,” he said, “so there should be at a minimum fine-tuning and perhaps re-routing of the plan.”
- Economists against 50p tax. Further encouragement for Osborne to focus on growth policies was voiced in The Financial Times this morning, when 20 economists signed a letter urging the chancellor to drop the 50p top rate of income tax. The economists – including Cambridge academics and former Bank of England policy-makers – argued that the tax rate “punishes wealth creation” and “is doing lasting damage to the UK’s economy.” They went on to say that the 50p tax “is often portrayed as a justified tax on the rich, but the economic damage it causes means that it is against the interests even of ordinary workers who don’t pay it.” And chiming with the points raised by Damian Reece and Bill Gross, the letter urged Osborne to scrap the tax “as part of a package of measures to stimulate growth.”
- Osborne: Man of the year. There was some good news at least for Osborne this week: GQ magazine named him their Politician of the Year. “While the US and Europe toiled to avert catastrophe, the Chancellor stuck to his guns – and so far, has been proven right,” gushed Matthew D’Ancona, comparing Osborne to “Atlas carrying the coalition’s weight on his shoulders.” Not all GQ readers agreed, with one commenter pointing out that “we are still mired in economic difficulties, and most of Osborne’s predictions re growth, inflation, unemployment etc have been proved wrong. Still, he wears nice suits and went to Eton.”
