Put brakes on spending cuts, OECD tells Osborne

By politics.co.uk staff

The pace of spending cut should be slowed down, a major international thinktank has said.

The Organisation for Economic Cooperation and Development (OECD), which had previously supported the coalition's plans to sharply cut spending, suggested it would be worth decelerating the rapid pace of spending cuts if the economy continues to struggle.

It downgraded its 2011 growth forecast for the UK economy from 1.5% to 1.4% yesterday, after official figures confirmed GDP in the first quarter of the year stood at 0.5%.

Its prediction for 2012 has been lowered even further, from two per cent to 1.8%.

"We see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front," the OECD's chief economist Pier Carlo Padoan said in the Times newspaper.

"We have seen that [growth numbers] are a bit weaker than expected. Should that continue to be the case, there is scope for slowing the pace."

He suggested that the pace could be slowed over the next quarter "if things turn out to be weaker than expected".

Shadow chancellor Ed Balls leapt on the shift in stance from the OECD as evidence that the coalition's solution to the deficit was not working.

"George Osborne's rigid determination, despite all the evidence, to stick with deep and fast cuts and refuse to even consider a plan B does not boost his credibility, it undermines it," he commented.

"We know the government's most senior civil servants have drawn up a plan B, which ministers have hastily rejected.

"But it's now time George Osborne listened to wise advice, looked at what is happening to the economy and thought again about the speed and scale of his cuts."