Social Market Foundation responds to GDP figures

25 April 2012

Responding to the latest GDP figures, which show that the UK is back in recession, SMF Director Ian Mulheirn said:

“Today’s GDP figures show unequivocally that the Government’s plans aren’t delivering growth. But George Osborne’s response that austerity is the only way to deliver bond market confidence misses the reality that he can boost growth significantly without deviating from his deficit reduction plans.

“As the IMF said last week, and the SMF argued before the budget, it is within the Chancellor’s power to stimulate the economy without adding a penny to the deficit. By cutting low-growth spending or imposing a temporary tax rise, the Chancellor can find the money needed for a massive investment boost, neatly manoeuvring his way to a sizeable stimulus which will give the economy the kick-start it now clearly needs.

"The deficit reduction  versus stimulus debate is a false dichotomy. Through a funded stimulus the Chancellor could boost bond market confidence and growth simultaneously. So the real question has to be: does he have the courage to do it?”


Notes to Editors

  • The SMF’s plan for growth, Osborne’s Choice: Combining fiscal credibility and growth is by Ian Mulheirn. Download a copy from the SMF's website at: http://www.smf.co.uk/research/economic-policy/osborne-s-choice-combining-fiscal-credibility-and-growth

  • The paper includes responses from a number of respected economic commentators, including Robert Shiller, Gavyn Davies, Evan Davis and Sir Richard Lambert. Full responses can be viewed online

  • In the World Economic Outlook, the IMF states: "given concerns about fiscal room, a balanced budget fiscal expansion could support activity and employment while keeping fiscal  consolidation plans on track. For example, temporary tax hikes matched by increases in government purchases - for much-needed infrastructure - could lead to an almost equal rise in output".

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