Economists call for fiscal policy committee

18 Feb 10
An independent body should be set up to scrutinise government plans to plug the public deficit, according to leading economists
By Lucy Phillips

18 February 2010

An independent body should be set up to scrutinise government plans to plug the public deficit, according to leading economists.

Tim Besley, professor of economics and political science at London School of Economics, told Public Finance that a fiscal policy committee would help achieve ‘an appropriate level of transparency and accountability’.

While admitting that there was a sense of ‘quango fatigue’, Besley said the business case for a fiscal watchdog was ‘perfectly credible’ given the savings the country would make in interest payments and risks associated with credit ratings. ‘This body would more than pay for itself,’ added Besley, a former member of the Bank of England’s Monetary Policy Committee.

The proposal was included in a letter to the Sunday Times newspaper on February 14. Besley and 19 other leading economists called for an all-party consensus on a ‘credible’ deficit reduction plan ahead of the election.

The experts criticised Labour’s current plans as too slow and said the structural deficit should be eliminated over a single Parliament to ward off risks to economic recovery.

Besley later told PF that the economists were not intending to ‘be alarmist about the consequences of not acting quickly’. The UK was ‘not about to enter into same territory as Greece’, he said, but the government needed to clearly state its position so as not to jeopardise confidence in its economic policy.  

He added that any plan had ‘to be sensitive to the fragility of recovery’ but ‘that does not get us off the hook that there is a need over a Parliament to cut the deficit’.

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