National Institute of Economic and Social Research (Britain’s longest established independent economic research institute) have hit out at the government’s austerity measures, and predicted “lacklustre” growth of just 1.5% in 2011. Last June the Office of Budget Responsibility forecast that growth in 2011 would be 2.3% which was downgraded to 2.1% in November. NIESR have also predicted that inflation in 2011 will be 3.8%, compared to the Office for Budget Responsibility’s forecast of 2.8% in November.
The research institute have also provided a possible opening for George Osborne to pursue a “plan B”, saying that there is a case for postponing at least part of the cuts programme due to low borrowing costs:
“there is a case for promoting the recovery by postponing at least some of the austerity programme. The cost of delay would be acceptable because borrowing costs are currently low.”
Labour’s chief secretary to the Treasury, Angela Eagle, said that Osborne needs to “get his head out of the sand”:
“When Labour left office growth was picking up, unemployment was falling, inflation was low and the deficit came in over £20 billion lower than forecast. But the NIESR’s report shows that the economy has taken a turn for the worse since George Osborne made the choice to pursue a different course by cutting the deficit too far and too fast.”
“This report predicts that economic growth is set to slow down and will be significantly lower than forecast since the Tory-led government’s emergency budget and spending review last year. It says that inflation will be higher this year than the Office of Budget Responsibility forecast in the autumn before the VAT rise. And it endorses the growing calls for the chancellor to boost rather than hamper the recovery by going more slowly on his austerity plans.”
“It’s time for George Osborne to get his head out of the sand, look at the facts and rethink his reckless plan to take another £20 billion out of the economy in April on top of the VAT rise. He needs a plan B and he needs one quick.”