IPPR says Osborne should adopt its Plan B

16 Mar 11
A leading think-tank today urged Chancellor George Osborne to replace his deficit-cutting plan with its own ‘Plan B’ in next week’s Budget.

By Lucy Phillips

17 March 2011

A leading think-tank today urged Chancellor George Osborne to replace his deficit-cutting plan with its own ‘Plan B’ in next week’s Budget.

The Institute for Public Policy Research proposed a ‘deficit reduction averaging’ approach. This would require the chancellor to eliminate the deficit by 2017/18 and achieve this through equal measures in each year.

The proposals, Deficitreduction averaging: a Plan B for fiscal tightening, would take two years longer to reduce the deficit than under the coalition’s plan of 2015.

The IPPR also claims that its strategy would be more flexible than the plans drawn up by previous Chancellor Alistair Darling, which are supported by the current Labour front bench. If each year’s deficit reduction goal was an average of the remaining reduction required, the government could change the pace of deficit reduction according to fluctuation in the economy and short-term growth.   

IPPR senior economist Tony Dolphin said: ‘There is an alternative to the Osborne and Darling deficit reduction plans. Our “Plan B” is based on economic pragmatism and not politically imposed deadlines. It would give the chancellor a formula for flexibility.

‘Rather than setting out detailed year-by-year plans to eliminate the entire structural deficit, or to halve the actual deficit, in this Parliament, our “plan B” proposes annually reviewing progress and the economic outlook, so that deficit reduction is sensitive to swings in economic growth.

‘This would reduce the risk of a negative spiral of weak economic growth leading to greater efforts to reduce the deficit, which in turn add to pressure on the economy.’

The Budget takes place on March 23.

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