Britain's austerity measures will stay on track: economists

4th January 2011, Comments 0 comments

Britain's plan to reduce its record deficit will stay on track this year because deep spending cuts and tax rises will not cut growth enough to cause a double-dip recession, leading economists said Tuesday.

In a survey of economists for the Financial Times, most were of the view that the deficit-slashing measures were a big gamble, but one that was likely to pay off.

The view of the economists will be a boost to the Conservative-Liberal Democrat coalition on the day a tough austerity measure comes into force.

Britain's rate of VAT, or sales tax on goods and services, jumps Tuesday to 20 percent from 17.5 percent.

In the survey of 78 economists, which included 10 former members of the Bank of England's monetary policy committee, 43 thought the programme to tackle the deficit would be "on track" by the end of the year.

Only 13 said an alternative plan was necessary to tackle the huge deficit of around 150 billion pounds (232 billion dollars, 174 billion euros) that the coalition inherited from the previous Labour government.

"I expect the fiscal figures to come in a bit better than plan unless external shocks drive us back towards recession," John Gieve, former deputy governor of the Bank of England, told the paper.

There was concern Britain's economic prospects could be affected by external factors, however, with some expressing fears that a mounting eurozone debt crisis could imperil recovery.

The coalition, formed after inconclusive polls in May and led by Conservative Prime Minister David Cameron, has unveiled some of the harshest spending cuts seen in Britain for decades to deal with the deficit.

© 2011 AFP

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