Vicky Pryce joins economists calling for economic Plan B

What to make of the Observer front page, highlighting a letter from 52 economists to the newspaper warning about the need for George Osborne to draw up a plan ?

The letter suggests:

“As economists and academics, we know the breakneck deficit-reduction plan, based largely on spending cuts, is self-defeating even on its own terms. It will probably not manage to close the deficit in the planned time frame and the government’s strategy is likely to result in a lot more pain and a lot less gain.”

The letter would appear to be a fillip for Ed Balls, whose economic position has left him looking relatively isolated at times (although he frequently cites support from senior columnists at the Guardian and the FT). Balls has staked his credibility on calling for a more gradual deficit reduction programme.

And yes he has already popped up on the airwaves this morning to say:

“The lesson I learnt from all that time in the Treasury and the lesson which, to be honest I think history teaches us, is that it sounds good for a Chancellor to say ‘I’ll carry on, I won’t be deflected, I’m going to stick to my plan’, But the trouble is, the plan isn’t working. The right and credible thing is to change course.”

Then again, one would now expect a retaliatory letter, perhaps with more names, backing Mr Osborne’s strategy; probably within a day or two.

I haven’t heard of most of the signatories; although this could just reflect my ignorance. (Also, how can they be so sure that Osborne doesn’t have a back-up plan in private? I agree with Phil Collins, the Times’ superb columnist, who told the Marr show this morning that once you have announced a plan B in public you destroy your plan A.)

The Observer notes that the sentiment is shared by “two former Whitehall advisers and two signatories of last year’s high-profile letter backing the Tories’ cuts” - although none of them have actually signed the letter to the paper.

One of the former government advisers is none other than Vicky Pryce, former head of the economic service at the department for business – and also the estranged wife of beleaguered Chris Huhne. Her comments, predicting that ministers will at some stage “panic”, won’t exactly be welcomed by the cabinet.

Then again, Huhne himself commented last autumn that the coalition did not need to be “lashed to the mast” of the cuts and ought to “tack about” if necessary.

UPDATE: Later on Sunday morning Ms Pryce gave an interview to Sky where she set out her thoughts in more detail.

Interestingly, her position is much more nuanced than her brief quote in the Observer. Yes, she called for a “little more flexibility” so business can be sure the government is there to help when things get tough. But she also said she believed the coalition had done the right thing: “I don’t think they were wrong.”

“They absolutely had to demonstrate that they were serious about this. I think everyone was waiting to see them doing something quite, sort of serious and significant in that area. So they had no real choice in that respect….But the world economy has been recovering a bit more slowly than was expected…..the result is that there has been a real reduction in confidence. That probably wasn’t anticipated at the time, when everyone thought we would be coming out of recession pretty quickly.”