MercoPress. South Atlantic News Agency

Top economist says UK economy “could have started a recovery”

Miles: optimistic new member of the Bank of England's monetary policy committee

There are signs the British economy may already have started a recovery, according to economist David Miles. He is due to join the Bank of England's rate-setting body next June.

“The worst of the recession may well be behind us” Miles, Morgan Stanley's chief UK economist, told the Western Mail newspaper.

“I'm less pessimistic than many of where the economy may be going,”

Tax cuts and lower interest rates, along with other initiatives, should by now have helped boost demand, he said.

Mr Miles is due to join the Bank of England's Monetary Policy Committee in June.

“Economic history teaches us that a combination of tax cuts, running large fiscal deficits, substantial cuts in interests rates and more quantitative easing is likely, with a certain time lag, to have a substantial impact on demand in the economy,” Mr Miles told the paper.

“That's not a confident prediction but a judgment about what may be the case.”

In related news it was announced the British government has plans to offer subsidies of up to £5,000 to encourage the purchase of electric or plug-in hybrid cars.

It is part of the government's £250m plan to promote low carbon transport over the next five years. But ministers do not expect eligible cars to hit the showrooms until 2011.

The British car industry as a whole welcomed the plan, but George Osborne, the shadow chancellor, dismissed the initiative as a “fantasy announcement.”

Critics said the government needed to invest more in places to recharge the vehicles and in public transport.

The strategy includes plans to provide £20 million for charging points and other necessary infrastructure. At present they are very limited.

Transport Secretary Geoff Hoon said that there was huge potential to reduce emissions, with less than 0.1% of the UK's 26 million cars now electric.

The available funding would only be for fully electric and plug-in petrol-electric hybrids. As such, currently commercially available hybrids, such as the Toyota Prius, would not be eligible.

There is a limited range of electric vehicles on the British market, which cost from about £8,000 to more than £80,000 for high-performance models.

Sales have been held back by a number of factors: They commonly have a limited range of about 40 miles, take several hours to charge, and have only two seats.

But the government hopes to target drivers of a new generation of all electric or plug-in petrol-electric cars, which are expected to go on sale in two years time.

UK Business Secretary Lord Mandelson said: “When people see the electric car - the speed, the lack of noise - they are going to fall in love with it.”

“We need to lead this green motoring revolution,” he added.