Kate Barker, a former Bank of England rate-setter, said in a report for a think-tank how the government’s austerity programme left the UK with very little breathing space. ‘There is a risk that the fiscal mandate, rather than a useful discipline, will become a straitjacket,’ she said.
She described how ‘there is a danger of self-defeating austerity, if some room for manoeuvre cannot be developed,’ and said targetted government spending should be increased while interest rates are so low.
Osborne already faces pressure from business groups to cut taxes and regulation further, amid fears that firms will begin to lay more people off if the economy doesn’t spark into life by the end of the year. And given that she’s a possible candidate to succeed Mervyn King as governor of the BoE, Barker’s tuppence worth is another body blow for the chancellor.
Come on Osborne, pull something out of the bag and maybe these nay-sayers will go away…