We understand the scale of the challenge that Labour’s economic inheritance poses to the successful delivery of the government’s missions (Report, March 19). We welcome the necessary increases in current and capital spending announced in the Budget, as well as the establishment of the National Wealth Fund and changes to the fiscal framework, which provide a more complete view of the government’s financial position.
These changes to investment and current spending were a welcome first step. But given the difficulty of our economic situation, they will be far from sufficient to drive the decade of national renewal that the government has committed to, and which the UK sorely needs.
The increases to public investment announced last October only cancel out the cuts planned by the previous government. The rise in capital spending will maintain public investment at around 2.5 per cent of GDP over the next five years, which still falls short of the OECD average of 3.7 per cent over the past 25 years.
The last 15 years have taught us that the UK cannot cut its way to growth. Spending cuts now would further undermine both growth prospects and fiscal sustainability, storing up even greater problems with government borrowing costs further down the line. Achieving growth will require rebuilding public services; investing in skills, R&D and the strategic, climate-safe industries of the future; and boosting demand by strengthening the social safety net.
It would therefore be a profound mistake to change course and introduce new cuts to spending or investment. We recognise that global turmoil has created new fiscal pressures, both on defence and in the form of higher government borrowing costs, but this should not deter the UK from pursuing the economic strategy needed to deliver your missions.
Ultimately, substantial additional tax revenue will be required to meet these spending needs. You will rightly be searching for options that recognise ongoing pressures on working people and ensure that those with the broadest shoulders pay their fair share of tax, as well as enhancing overall economic growth. While there will be no easy choices, the government should be looking at all options to balance these objectives.
We urge the government to continue to chart a course away from austerity, and make the bold policy choices to truly kick-start growth and deliver the economic stability, prosperity and resilience this country needs.
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
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
Professor of Regional Economy, Open University
Professor David Vines
Emeritus Professor of Economics and Emeritus Fellow of Balliol College, University of Oxford
