OECD chief economist tells Osborne: “Slow down the pace of spending cuts”

The deputy secretary general and chief economist of the OECD, Pier Carlo Padoan, tells UK chancellor George Osborne to "slow down the pace of spending cuts".

Following on from my article yesterday, the Times (£) and the Financial Times (£) have now published interviews with the Organisation for Economic Co-operation and Development (OECD) deputy secretary general and chief economist, Pier Carlo Padoan.

They reveal startling new details of how the organisation has turned from being a bulwark for Osborne’s cuts to a frustrating obstruction and thorn in his side.

Back in March, the OECD Secretary-General, Ángel Gurría, stood side-by-side with Osborne at a joint press conference and declared:

“…when you have double-digit deficit you have to move very fast, very decisively.”

Leaving no doubt, he told Osborne to:

“…stay the course.”

Fast forward two months and the OECD has performed a startling u-turn on its support upon which Osborne so depended for the scale and pace of his austerity drive.

Disappointing export performance and the lack of growth due to Osborne’s cuts have now convinced the OECD that the chancellor is executing his cuts too fast. This is highlighted by Pier Padoan now calling upon Osborne to:

“…slow down the pace of spending cuts.”

Echoing Labour’s call for a Plan B, Padoan goes on to say the Tory-led government should:

“…be selective in the selection of spending cuts and their speed.”

In other words, in times of an economic slowdown, Osborne needs to avoid focusing on his political agenda and instead adjust fiscal policy to support growth. This is especially the case in light of the estimated borrowing figures by the OECD for 2012 that amounts to 7.1 per cent, leaving little hope for Osborne to achieve his debt and deficit target by the end of this parliament.

Given his repeated flagging up of the OECD support for his cuts, Osborne will now have great difficulty in ignoring the advice by Padoan. Shadow chancellor Ed Balls believes this intervention is highly significant, and should force Osborne to listen, review and think again about “the speed and scale of his cuts”.

Further pressure was piled on Osborne yesterday with the release of business investment and household spending figures. Business net investment fell sharply by 7.1 per cent in the first quarter of this year, which spells disaster for Osborne’s plan of relying on the private sector to offset the drop in public spending.

With households beginning to feel the squeeze as cuts, taxes and inflation are taking their toll, spending suffered an unexpected drop of 0.6 per cent in the first quarter. With the UK economy being traditionally a consumerist country, with household spending accounting for approximately two-thirds of the economy, it does not bode well for overall growth.

Instead of setting out a plan for growth, Osborne is driving the economy perilously close to the brink of collapse. Valuable allies that had enforced his ideological mission are beginning to wear thin by the day.

Instead of cutting too far, too fast, the Chancellor needs to take a step back and reconsider the simple fact that has been advocated by Labour again and again: the economy needs growth and jobs to get the deficit down. In other words, we need a Plan B.

28 Responses to “OECD chief economist tells Osborne: “Slow down the pace of spending cuts””

  1. Janeslowey

    RT @leftfootfwd OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  2. Jack PK Chadwick

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  3. Rosie

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  4. Tweet4Labour

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  5. manishta sunnia

    Msg shud be #nocuts not slow down. OECD chief economist to Osborne "Slow down the pace of spending cuts" //bit.ly/jOrild @leftfootfwd

  6. Oasis Caretaker

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  7. matthew pitt

    RT @leftfootfwd: OECD chief economist tells Osborne: "Slow down the pace of spending cuts" //t.co/OYBg5pz

  8. Rich

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  9. DPAC

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  10. Nancy Kelley

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  11. azumah

    OECD chief economist tells Osborne: “Slow down the pace of spending cuts” – //j.mp/jsGl73

  12. AltGovUK

    RT @leftfootfwd: OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  13. Oliver Strudwick

    RT @leftfootfwd: OECD chief economist tells Osborne: "Slow down the pace of spending cuts" //t.co/OYBg5pz

  14. James Grant

    OECD chief economist tells Osborne 'Slow down the pace of spending' //t.co/ubc47J8 via @leftfootfwd #cuts

  15. Hugh Potter

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  16. ElmoCP

    Tories cutting too fast and too deep say OECD //t.co/jGadG69

  17. 13eastie

    What Mr Padoan ACTUALLY said to the Times was this:

    “We see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front.”

    “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.”

    At no point does he call for cuts to be reduced.

    He merely suggests further that, should any fiscal measures be used to maintain demand in future this should not be addressed through the reversal of existing tax increases, but by rescheduling planned cuts:

    “I would not reverse the measures I have announced because that would bear down on credibility; I would slow down the pace of spending cuts, rather.”

    It doesn’t sound quite as exciting when quoted in context, though, does it?

    Yesterday’s OECD report also said the government had “struck the right balance” in its overall deficit-reduction strategy and this “should continue”.

    And, even according to the BBC:

    “Asked whether there was any difference in opinion between the report and the economist’s views, the OECD said Mr Padoan had signed off on the document and stood by its contents.”

    THESE EVIDENCE-FREE BLOG-POSTS ARE BECOMING RATHER THE NORM AT LFF.
    IRONIC TO USE MURDOCH’S PAY-WALL TO COVER ONE’S TRACKS.

  18. Matthew Pitt

    I’m quite surprised how you manage to skip one of the most essential parts of the quote to air your views that the OECD is not backtracking – contrary to what the Times, the FT, the Guardian, the Telegraph and other reputable newspapers have stated. The quote you miss out on, which is a logical follow-on from the ones aforementioned, is that the government should be selective of their cuts and its speed. I am glad the BBC is backing this by saying that the OECD signed off the document, showing it is not a vogue voice like that of Cable, but a united voice telling Osborne to see sense. There is a strategy to cut the deficit, and their is a change to the strategy that will lead to having less of a negative impact on growth and jobs. One may argue it is the same strategy, like one may argue a changed NHS bill is still the same. In the end, it is fundamentally a change in plan, from A to B.

    I do look forward however to any further comments you may have.

  19. Anon E Mouse

    Matthew Pitt – Since you call the tax avoiding Guardian newspaper “reputable” leads me to believe you are not well!

    Any paper that actually takes Polly Toynbee seriously can’t be that serious itself…

  20. BenM

    As pointed out extensively before he foolishly set out on this path, cuts are not going to close the deficit.

    The impact on economic growth, which we are already seeing, reduces the tax take and maintains the deficit.

    Osborne is failing, the international economic organisations who backed this idiotic deficit reduction plan are preparing for yet another reverse ferret as their neo-liberal idiocy fails once again.

  21. Anon E Mouse

    Matthew Pitt – From Guido:

    “The Secretary General of the OECD just went on Sky News to say he hasn’t changed his mind at all. Quite the opposite in fact, and he went on to accuse the Shadow Chancellor of misinterpreting what he’d said:

    “No way was there any signal of a change in course. We are continuing to be supportive. We can now say it with an even greater conviction because we just put out our economic outlook yesterday…””

  22. Ed's Talking Balls

    I don’t care that Anon E Mouse has said it already. It absolutely bears repeating, to counter such egregious spin (or lies, not to put too fine a point on it):

    ‘No way was there any signal of a change in course. We are continuing to be supportive. We can now say it with an even greater conviction because we just put out our economic outlook yesterday’.

    Those are the words of the Secretary General of the OECD. I prefer to take him at his word, not what Ed Balls’ or LFF’s partial interpretation.

  23. Νέα Νέμεσις Εργασίας

    OECD chief economist appears on Sky News to slap down @leftfootfwd //bit.ly/jOrild

  24. 13eastie

    Here you are, Matthew – no paraphrasing, no quoting out of context, no pay-wall, no politician’s interpretation, no spin, no lies:

    Hear it straight from the horse’s mouth

    //youtu.be/HBuRung3E0I

    EVIDENCE-BASED ENOUGH FOR YOU?

    It’s hilarious the glee you people seem to share in talking down the economy and baying for more debt yet! (You must *hate* your kids).

  25. matthew fox

    Record borrowing for April, Osborne beats the forecast by £3.5 Billion and all we are getting is ” Stay the Course ”

    Looks like the deficit plan will be a dead weight around the country’s neck.

  26. Ken Hall

    “Record borrowing for April, Osborne beats the forecast by £3.5 Billion and all we are getting is ” Stay the Course ”

    Terrifying to think how much worse the debt would be if labour had still been in power, with further downgrades in our rating and higher interest rates, the cuts would have had to have been far deeper in the years ahead, than they are currently.

    Some labour people seem to believe that the deficit would be reduced by increasing government spending.

  27. Martin Morgan

    OECD chief economist tells Osborne: "Slow down the pace of spending cuts": //bit.ly/jOrild by @MPittParliament

  28. Fony Blair

    One word – ‘Fail’

Leave a Reply