Chancellor George Osborne 'must tax and go for growth'

Writing in this newspaper today, Mr Sentance, senior economic adviser to PricewaterhouseCoopers, writes a “bolder” course is needed.

“A higher priority should be given to programmes which will help business competitiveness – such as investment in transport infrastructure,” he writes.

“On the tax side, we need a much stronger emphasis on longer term reform – cutting tax rates by spreading the tax base of tax and simplifying the tax structure.”

On Sunday, Mr Osborne’s predecessor, Alistair Darling, urged him to adopt “another plan” before his current policies do “immeasurable” damage.

Mr Darling used an open letter to the Chancellor to accuse him and the Bank of England of giving up on encouraging growth.

“It’s as if you’re both saying there’s nothing you can do and nature must take its course. But the damage that will do to our country is immeasurable,” he said.

He suggests “major spending projects” that would see investment in homes, power stations, railways and a third runway at Heathrow. “Unless you do something now it will be years before we recover.”

Just three of 20 economists who wrote an influential letter in 2010 backing the Conservatives’ deficit reduction plans are now prepared to stand by their original view.

Economists are also warning Mr Osborne that the Treasury is likely to take in less money through taxes than he predicted. Officials are said to be bracing themselves for further cuts as a result.