McDonnell leaps on OECD call to curb austerity

JOHN McDonnell has seized on a report by the influential OECD think tank which called for higher public spending to boost flagging global growth.

The shadow Chancellor said the report by the Paris-based Organisation for Economic Co-operation and Development was “another hammer blow” to George Osborne, who has pledged to eliminate the UK deficit and deliver a surplus by 2020.

Today the OECD downgraded its forecast for global economic growth this year, to 3 per cent, compared to its estimate of 3.3 per cent three months ago, and called for governments to spend more to invest.

“With governments in many countries currently able to borrow for long periods at very low interest rates, there is room for fiscal expansion to strengthen demand in a manner consistent with fiscal sustainability,” said Catherine Mann, chief economist.

“The focus should be on policies with strong short-run benefits and that also contribute to long-term growth. A commitment to raising public investment would boost demand and help support future growth.”

The intervention by the OECD is significant because it previously offered strong support for Osborne’s deficit-cutting plan. Now it has highlighted sluggish demand, low inflation and disappointing growth in wages and employment.

McDonnell leapt on the comments and said Osborne was acting “out of fear” for his bid to succeed David Cameron as Conservative leader.

“George Osborne is starting to look increasingly isolated… The OECD are correct to advise, what Labour has been arguing for months, that we need to increase investment, as the time is right to invest now in our future in much needed infrastructure, so that we avoid paying more at a later date for missing this opportunity.

“But the truth is that since entering Number 11, George Osborne doesn’t put his money where his mouth is on infrastructure spending. He cut the level of investment in the UK with investment in infrastructure set to fall as a share of GDP, and he has allowed the Infrastructure Pipeline to become blocked with only 9 per cent of projects listed as started.”

The OECD also said the global economy would expand at its slowest rate for five years and warned the impact of the worsening performance would be felt most in the US, the eurozone and Brazil and Canada.