The UK cannot cut its way to growth, top economists tell Chancellor ahead of Spring Statement

Their intervention, which has also been printed in the Financial Times today, comes the week before the Office for Budget Responsibility is due to publish its latest economic forecasts on 26th March. There are reports that in order to meet her fiscal rules the Chancellor will announce significant spending cuts in response. 

The group of economists – including Professor Jonathan Portes from King’s College London, Professor Mariana Mazzucato from University College London, Professor Ha-Joon Chang from SOAS, University of London and Professor David Vines from Oxford University – argue that “the last fifteen years have taught us that the UK cannot cut its way to growth.” 

They point out that although increases to investment and spending at last Autumn’s Budget were a welcome step in the right direction, the boost to investment only cancelled out the cuts planned by the previous government.

And they warn that introducing spending cuts now would harm growth prospects and fiscal sustainability, seriously undermining the government’s ability to achieve its missions. 

According to the group, delivering growth – the government’s ‘number one mission’ – will require more current and capital spending, including investment in public services, skills, climate action and the social safety net. New fiscal pressures from defence or higher borrowing costs should not deter the government from continuing “to chart the course away from austerity”, they say.

Meeting these spending needs will require substantial additional tax revenue, argue the economists. They note that while there are no easy choices, “the government should be looking at all options” to balance its objectives to deliver growth, reduce pressures on working people, and ensure those with the broadest shoulders pay their fair share of tax. 

Louis Willis, Director of the Invest in Britain campaign, which organised the letter, said:

“The fiscal pressures facing the government are significant. But the Chancellor should not be reaching for the old, failed playbook of cuts in response. 

“A return to austerity would be a disaster for public services, for living standards and for growth: successfully delivering the decade of national renewal that was promised will require more investment and spending, not less. The Chancellor must look at every lever available to her – including raising taxes on the wealthiest.”

ENDS

Notes to editors

1. A copy of the letter can be viewed here.

2. The signatories of the letter are Professor Mariana Mazzucato (University College London), Professor Simon Wren-Lewis (Emeritus Professor of Economics, University of Oxford), Professor Jonathan Portes (Professor of Economics and Public Policy, King’s College London), Professor Susan Newman (Professor of Economics, The Open University), Professor Ha-Joon Chang (Distinguished Research Professor, SOAS University of London), Professor David Bailey, (Professor of Business Economics, Birmingham Business School, University of Birmingham), Professor Phil Tomlinson, (Professor of Industrial Strategy, University of Bath), Dimitri Zenghelis (Special Advisor for the Wealth Economy Project, Bennett Institute for Public Policy, University of Cambridge), Professor Leslie Budd (Emeritus Professor of Regional Economy, Open University), Professor David Vines (Emeritus Professor of Economics and Emeritus Fellow of Balliol College, University of Oxford)

3. Professor Jonathan Portes, one of the letter signatories, is available for media interviews and comment.