UK GDP: Questions for Mr Osborne in Davos

  • 25 January 2013
  • From the section Business
  • comments

I asked George Osborne three questions this morning, minutes after the latest GDP figures came out. He only answered one of them.

He admitted that the figures weren't good. You could say his general tone came under the heading of "disappointed, but not surprised".

But he made clear that there would be no change to the government's strategy in response to this news. Quite the opposite.

"We can run away from our problems or we can confront them - and we're going to confront them."

That was the question he answered. In response to my second question, he did not take the opportunity to agree with Nick Clegg's recent suggestion that the coalition (and Labour) had cut capital spending too fast in the early part of the austerity programme.

Mr Osborne did agree that capital investment was important, noting the extra capital spending that had been put back into the budget since 2011. But, he said, restoring confidence in 2010 was important too. In other words, he deflected the question.

Nothing surprising in that, you might say. It's the job of a politician to say what he or she wants to say in these interviews, regardless of what they are asked. And the chancellor is very good at it.

But his failure to answer my last question did surprise me.

I asked him whether he was going to follow the advice that the IMF's chief economist, Olivier Blanchard, had given, in a BBC interview with Simon Jack - to use the Budget to rethink at least some of the austerity planned for this year.

I fully expected the chancellor to respond by saying that Mr Blanchard did not speak for the Fund - and the IMF was still 100% behind the government's plans. That is what has happened when the French economist has raised doubts about the UK in the past.

But he didn't do that. He said the government's strategy had not changed. And he noted that a former chief economist of the IMF, Ken Rogoff, had said only this week that he fully supported the coalition's plan. So, that's a former chief economist he mentioned. Not the current one. Or the IMF as a whole.

Privately, Mr Osborne's advisors insist that "the IMF's advice for the UK has not changed". That's true. The Fund says that too. Their broad support for the government's approach still stands.

But, as I pointed out earlier this week, one part of the IMF's advice last summer was quite consequential for Mr Osborne, and specific. It said last summer that the consolidation plans for 2013-14 "would need to be scaled back if growth does not build momentum by early 2013".

Mr Blanchard stood by that advice in his BBC interview: "If things look bad at the start of the year... and they do....there should be a reassessment of fiscal policy in the Budget".

So, what have we learned this morning? We've learned that the economy is flat, at best. We have also learned that the IMF's advice for the UK has not changed. It is, however, starting to diverge from Mr Osborne's.