No more major cuts in public spending

A comprehensive assessment of the economic impact of the Coalition’s economic policies will be the task of future economic historians. But there are some clear lessons that should inform the stance taken by the next government.

In the first half of 2010 the economy was growing at an annual rate in excess of 2 per cent and both bond markets and foreign exchange markets were stable. The austerity policy (and austerity rhetoric) of the incoming Coalition Government helped to stop the recovery in its tracks and precipitated two-anda-half years of stagnation. The Office for Budget Responsibility estimates that austerity reduced economic growth by 1 per cent in both financial years 2010-11 and 2011-12. The easing of fiscal policy in late 2012, combined with quantitative easing and extremely low interest rates, has resuscitated the recovery, although growth in GDP per head over the past two years is no greater than its long-term average.

The overall policy result since the financial crisis of 2008-9 has been the slowest recovery from any major recession in modern times.

It is imperative that the mistakes of the past five years are not repeated, and that the new government elected on 7 May pursues a balanced expansion, eschews further major cuts in public expenditure or large tax increases, and focuses on desperately needed investment in capacity, research and skills to address the productivity crisis that is the other main economic outcome of the past five years.

Christopher Allsopp Fellow of New College, Oxford; former member of the Monetary Policy Committee, Bank of England.

David Blanchflower Professor of Economics, Dartmouth College and University of Stirling; former member of the Monetary Policy Committee, Bank of England.

Mark Blyth Professor of Political Economy, Brown University, USA

David Cobham Professor of Economics, Heriot-Watt University, Edinburgh

John Eatwell Emeritus Professor of Financial Policy, University of Cambridge

Richard Layard Emeritus Professor and Founder, Centre for Economic Performance, London School of Economics

Marcus Miller Professor of Economics, Warwick University

John Van Reenen Professor, Director of the Centre for Economic Performance, London School of Economics

David Vines Professor of Economics, University of Oxford

Simon Wren-Lewis Professor of Economics, University of Oxford