AUSTERITY HAS DAMAGED RECOVERY, SAYS FORMER BANK OF ENGLAND OFFICIAL

Likelihood of a triple-dip recession and more than two years of flat growth partly blamed on Osborne's handling of the economy, says Adam Posen

Phillip Inman, economics correspondent guardian.co.uk, Tuesday 22 January 2013

Adam Posen, who stepped down from the Bank of England in 2012. Photograph: Graham Turner for the Guardian

The chancellor George Osborne has cut public spending too quickly and hampered the UK's recovery, according to former Bank of England official Adam Posen.

The likelihood of a triple-dip recession and more than two years of flat growth can be partly blamed on Osborne's handling of the economy, said Posen, who stepped down from the central bank's interest rate setting committee last year.

Posen said the crisis in the eurozone remained a large factor hampering the UK's expansion, and would continue to be a drag in 2013 while it remained in recession.

However, a lack of demand for UK goods from the continent was not the only reason the economy had failed to grow.

Echoing the stance taken by opposition Treasury spokesman Ed Balls, Posen said: "It was not something I was able to say when I was at the bank, but it is my belief that the government has pressed ahead too quickly with austerity."

He warned that the time to cut spending is later in the economic cycle, when the economic recovery has become established and tax receipts are restored to levels that can cushion the impact.

Posen, who was appearing in parliament on Tuesday before the Treasury select committee, will fly to Davos in Switzerland for the World Economic Forum where he take part in a debate on new economic thinking.

He has previously expressed concerns about government policies, especially the continued concentration of lending by the major banks.

In collaboration with other leading economists, he has championed a state-backed investment bank to boost lending to small and medium-sized businesses as a major plank of a growth package.

He tolds MPs on the all party committee that Labour and the Liberal Democrats had backed the plans, but he had failed to win over the Treasury.

Posen also expressed alarm that UK businesses had failed to wean themselves off exporting to the eurozone in favour of new markets. He said it was likely that while cultural issues played a strong part in exporters following existing trade routes, restrictions on funds for investment to new markets were also an important factor.

http://www.guardian.co.uk/business/2013/jan/22/austerity-damaged-uk-recovery-adam-posen

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