Mr Cameron in Davos - and bother from the IMF

David Cameron at Davos Is it time for Mr Cameron and his chancellor to think about Plan B?

David Cameron wants to use his keynote address here in Davos today to call for international co-operation to make sure that global companies pay their fair share of tax.

But, the movers and shakers meeting here may be more interested in what he said yesterday about Britain's future in the European Union.

They also want to hear what Mr Cameron and his chancellor - speaking later today - plan to do to add life to Britain's feeble economic recovery.

George Osborne will want to point out that the latest forecasts from the International Monetary Fund show Britain growing faster than the eurozone in both 2013 and 2014.

Setting a date

He will be less happy with comments from the Fund's chief economist, Olivier Blanchard, suggesting that the time is right for the chancellor to reassess his budget plans.

IMF's Olivier Blanchard: There should be reassessment

Mr Osborne has been accustomed to getting solid public support for his economic policies from the IMF, even when the UK economy continued to disappoint, and even when the IMF's broader economic research suggested that a slower approach to cutting the deficit in 2010 might have been less damaging to the recovery.

Nearly every time the Fund has reported on the UK since 2011 it has suggested that the pace of tightening might need to be rethought, if the prospects for growth got even worse.

But although the growth forecasts have been continually revised downwards, the time for that rethink somehow never arrived.

Except, last year, the Fund's annual health check of the economy included a few sentences that were more concrete - and which included a date. (I wrote about it at the time)

The report warned that the pace of fiscal tightening being planned for 2013-14 was faster than in 2012-13, and might be difficult for the economy to handle, if the recovery continued to be anaemic.

Specifically, the report said the plans "would need to be scaled back if growth does not build momentum by early 2013".

In an interview for the Today Programme, Mr Blanchard has now told the BBC that the Fund's advice had not changed: "Our early advice is still very much there... If things look bad at the beginning of 2013, there should be reassessment of fiscal policy. We still believe that."

Mr Osborne will still be in Davos when the first estimate for growth in the last three months of 2012 is released tomorrow. If that is as weak as many fear, the IMF seems to think that the Budget in March will be the time for the chancellor to take stock.

Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this

    Comment number 41.

    Humans have travelled the path of life for sometime, in history, the path has been attrocious & so new paths travelled along.

    Osbourne cannot know his austerity paths conclusion until it is travelled down.

    It has now been travelled down & is evidentially a dangerous & damaging path, just on this basis it needs changing/diverting.

    Problem is, politics is about ideology & not realism

  • rate this

    Comment number 40.

    I also gave a sigh as soon as SF intervened.
    Once again left wing BBC employees fly around the world, stay in hotels at taxpayers expense and what do they contribute to the debate ?
    Nothing, every word is aimed at putting down the UK and the positive work that is going on by hard working people, Ms Flanders go and become a labour MP and apply for your job every 5 years if you dare.

  • rate this

    Comment number 39.



  • Comment number 38.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 37.

    We are still being fed the general line that "The Recovery" is somehow inevitable - just a matter of time & tweeking policy a bit. What's becoming clear is that the patient - the global economic & finance system - is not recovering at all but in rapid terminal decline. The rush to asset strip & hoard money by the wealthy, banks & big corporations indicates that they at least see what's coming.

  • rate this

    Comment number 36.

    John from Hendon your spot on about interest rates they have been far too low for far too long. I remember listening to a radio phone- in , around 2002/2003, about economics, a guy phoned in and said that low interest rates where far more damaging than high interest rates, and that time will show this, this for me has proven to be true.

  • rate this

    Comment number 35.

    #8 Brangy

    In 2010 the IMF wrote off US$1.3bn debt & rescheduled $1.7bn more in DRC.

    The IMF & World Bank wrote off debt for 24 Highly Indebted Poor Countries (HIPCs), including 20 in Africa at G8 in 2005 Gleneagles Multilateral Debt Cancellation Deal.

    IMF's historical development record may be more easily challenged, but changes have taken place.

  • rate this

    Comment number 34.

  • rate this

    Comment number 33.

    I wouldn't take much notice what the so-called economic experts at the IMF say as they never even saw the financial crisis coming.

    You would be better off asking Mystic Meg for advice.

  • rate this

    Comment number 32.

    Can we have the official Clapometer scores please?

    Who received more applause ...

    ..the PM for his speech?

    ..or SF for her question?

    Excellent speech, PM ...

    ...and very good question SF, you certainly got yourself noticed, even Sky news promptly picked up on your sharp, insightful intervention, choosing not to comment on the other very good audience questions, in your favour !

  • rate this

    Comment number 31.

    There will be no growth until the individual in the street feels confident to spend money. We have a part time, short term contract, zero hours contract 'flexible' labour market where people don't know whether their job is coming or going most of the time. DC's and his rich chums in Davos won't grasp that as they wouldn't recognise that kind of day to day reality if it slapped them in the face.

  • rate this

    Comment number 30.

    Mr Cameron is right to address corporate tax avoidance. How do employees & owners of Comet, Jessops, HMV, etc feel, when Amazon paid 0 UK corp' tax on £3.3bn UK sales?

    Mr Cameron's EU policy is "if", "renegotiate" & "exit maybe". The Chancellor's economic policy is "sitting on the hands".

    George Osborne made bold Davos statements in '11 & '12. What of UK AAA rating & banks in 2013?

  • rate this

    Comment number 29.

    17. Auden Grey
    Quite right, I have been proposing similar for 3 years except it was to build 200,000 student hall of residence places. It frees up cheap city center accommodation where the students live now,can be high density, avoids some issues of social housing,gives long term funding to universities to keep fees down and gvmnt / taxpayer can get money back from a rent share with the uni's.

  • rate this

    Comment number 28.

    Highlight of Davos PM speech Q&A

    PM: Lady at the back, next.

    SF: Stephanie Flanders, BBC

    PM: er...ugh

    Lurking in the shadows at the back of the hall Steph ... nice tactic to get your questionn in !!!

  • rate this

    Comment number 27. "we as a nation need to export far more to China, Brazil etc"

    We can only do so when we are economically competitive - which we are not!

    To become competitive house prices need to fall to Chinese levels so that wages can match them. Try to get you head round that!

    We cannot sell to the 3rd world/developing world unless we are competitive - they will not buy from us out of charity!

  • rate this

    Comment number 26.

    So, Stephanie, you're in Davos. At the TV licence-payers' expense. No sign or even hint of austerity at the BBC...

  • Comment number 25.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 24.

    It really is shocking, but now surprising, that there are so many people in absolute denial that QE can and must end and the the consequences, inevitable as they are, will be even more dire because of the continued QE.

    I say to these people (who voted against 21 below) you are living in cloud cuckoo land and I am right as my postulation are based on the study of economic history not make-believe!

  • rate this

    Comment number 23.

    The government needs to slash red tape on business and we as a nation need to export far more to China, Brazil etc. Trading mainly with moribund Europe will see us continue to flatline at best.

  • rate this

    Comment number 22.


    Quite right, this depression is already worse than the 1930s -

    (and I do not hesitate to point out this is what I said had to happen in 2008)

    I chose to model what may happen now on the Long Depression of 1873-1896 as it was a property/debt bubble depression.

    I fear now that the 2008 Depression will be even longer as the idiots are doing exactly the wrong things to end it!


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