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A letter published in last weekend’s Observer, Times and Sunday Times:

Sir,

We urge the UK Government not to heed the siren’s song of the 20 economists who, having failed to predict the crisis, now seek to advise on its resolution.

The world economy is in the deepest recession since the Great Depression. In the UK, output has collapsed by £70bn on an annual basis. Under such conditions, common sense tells us that the government must compensate for the collapse in private investment and address the high level of unemployment.

The only way to restore the public finances to health is to restore the economy to health. And that means public investment (not cuts) to create jobs and income in the private and the public sector. Government should oblige the banks that have been effectively nationalised to lend to the public sector at low rates of interest. Consequent tax revenues raised and savings on benefit expenditure will reduce the public debt. As Keynes observed: “Look after the unemployment and the budget will look after itself.”

There is already a credible plan on the table. It is called the Green New Deal. Invest now and we could kick-start the transformation of the UK’s energy supply while creating thousands of new green-collar jobs, restoring the UK’s skills-base and building the recovery on the manufacture of necessary goods. We urge the government to act now and implement the Green New Deal without delay.

Andrew Simms
Policy director, nef (the new economics foundation), London SE11

David Blanchflower
Professor of economics, Dartmouth College

Dr Anastasia Nesvetailova
Assistant professor, international political economy, City University

Victoria Chick
Emeritus professor of economics, University College London

Andy Denis
Senior lecturer in political economy, City University London

Ann Pettifor
Director, Advocacy International

Christine Cooper
Professor of accounting, University of Strathclyde, Scotland

Colin Hines
Convenor, Green New Deal Group

George Irvin
Professorial research fellow, University of London, SOAS

Ismail Erturk
Senior lecturer in banking, Manchester Business School

Prem Sikka
Professor of accounting, Centre for Global Accountability, Essex Business School

Richard Murphy
Tax Research LLP

Dr Stephanie Blankenburg
Department of Economics, SOAS

Stephen Spratt
Chief economist, nef

Bookmark and ShareAndrew Simms is nef‘s Policy Director and head of nef’s Climate Change programme.

Spending a fortune to prop up the banks but only small change on the urgent transition to a dynamic, low-carbon economy, is like building a crystal palace on sand, then shoving a few bricks under it as an afterthought for foundations.

New investment to match the Government’s rhetoric on climate change amounts to a tiny fraction of 1 per cent of the public support given to the finance sector. Such lack of ambition is counterproductive and a missed opportunity if Alistair Darling wants to pay down the public debt. As the Green New Deal Group point out in their report, The Cuts Won’t Work, productive investment in renewable energy, efficiency and green transport both pays for itself through the economic multiplier effect of spending, and ensures that more people are in work to pay taxes.

That’s without counting the additional benefits of cutting carbon emissions, increasing energy security and tackling fuel poverty. It’s odd that such basic economics is so hard for the Government and the opposition to grasp. History told us that it was when Roosevelt stopped spending three years into his New Deal that things went wrong and plunged the country back into depression. More than with the banks, the biosphere really is too big to fail and we should invest what is needed to maintain it, not small random amounts. Around £50 billion a year on a Green New Deal to create jobs and make the UK fit for a low-carbon future is needed to get us on track. The PBR prescription is more like medieval bloodletting, it is more likely to kill than cure the patient.

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.