Corbyn’s U.K. Spending Blitz Wins Backing From Economists

(Bloomberg) --

Former Bank of England policy maker Danny Blanchflower and more than 160 other economists and academics have backed the Labour party’s election promises as the best way to help the U.K. economy.

In a letter published in the Financial Times, the economists said productivity growth has all but stagnated over the past decade and more public investment is needed, particularly into green technology aimed at energy, transport, housing, industry and farming.

The economists also said that more needs to be done to improve public services and note that low interest rates mean it’s “basic economic sense for the government to borrow for this, spreading the cost over the generations who will benefit from the assets.”

Labour leader Jeremy Corbyn’s plans include an extra 83 billion pounds ($108 billion) of day-to-day spending and 55 billion pounds more for investment. Some have questioned how he would fund the program, which amounts to about six pounds of new spending for every one pledged by Prime Minister Boris Johnson’s Conservatives.

There’s a history of economists writing open letters in support of, or to criticize, an economic policy, stretching back to the early years of Margaret Thatcher’s premiership. In 1981, 364 economists including Mervyn King wrote a letter in the Times newspaper in protest the government’s fiscal tightening in the midst of a recession. In 2016, a number of former BOE policy makers were among almost 200 economists who signed a letter against a U.K. exit from the European Union.

Many of the signatories backing Corbyn’s plans are left-leaning, and the group includes Simon Wren-Lewis, emeritus professor of economics at Oxford, and Meghnad Desai, emeritus professor of economics at the LSE.

The group sees a need to boost wages and productivity, and says a higher minimum wage would help, as would tougher regulation of the so-called gig economy.

“As economists, and people who work in various fields of economic policy, we have looked closely at the economic prospectuses of the political parties,” the economists said in the letter. “It seems clear to us that the Labour party has not only understood the deep problems we face, but has devised serious proposals for dealing with them.”

To contact the reporter on this story: Fergal O'Brien in Zurich at fobrien@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net, Andrew Atkinson, Stuart Biggs

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