IMF says time to take stock

 
George Osborne The IMF thinks George Osborne should change the pace of the austerity plans

The IMF were polite in their published verdict on UK policies today - polite, and somewhat nuanced. So much so, that the Fund's deputy managing director had to spell out the implications to journalists in the press conference, a while after the statement was released.

But David Lipton was quite clear: the Fund has been saying for several years that the chancellor might have to slow the pace of deficit cuts if the economy continued to under-perform. In the staff's view, that day has now finally arrived.

The Fund doesn't think the chancellor should tear up his austerity plans or go back to square one. This is not a full-throated call for a Plan B. But as I suggested in April, that was never seriously on the cards.

What Mr Lipton and his colleagues have said is that it would be better for the economy and the government's long-term fiscal credibility if it did more to support growth this year - even if it means borrowing up to £10bn more, this year, than the chancellor currently plans.

That £10bn is the extra fiscal consolidation that is due to happen this year (i.e. the planned fall in the structural deficit - even though, as we know, total borrowing is likely to be broadly flat). The IMF thinks that implies an unwelcome "headwind to growth" which the chancellor can and should offset, including by bringing forward infrastructure spending.

Many of the measures the IMF has suggested have already been tried by the Treasury - I put it to the deputy IMF managing director that he was simply suggesting the chancellor do things they were already doing. He didn't accept my characterisation. He said, in terms, that the Treasury was talking about doing these things, but they were also very focussed on meeting their existing targets. In the Fund's view, he said, they should worry a bit less about the targets over the next year, and a bit more about supporting growth.

Again, we're not talking U-turns or a Plan B. This is not the mighty biff in the nose for the chancellor that the opposition might have been hoping for. There is much praise for the government here too. Crucially, the Fund doesn't think the government should slow the pace of deficit reduction overall - they still think the medium term plan makes sense. But it does, finally, think the chancellor should not just think about changing the pace of the austerity plans - but actually do it.

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

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  • rate this
    0

    Comment number 164.

    158"Christine Legarde is an ex 'French Finance Minister. wonderfull CV
    would you not agree? Check her French legacy, triple dip recession and huge unemployment figures.

    That's what made her perfect for the IMF. That's what they do. Take a bad situation and make it worse.

  • rate this
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    Comment number 163.

    "European Central Bank (ECB) president Mario Draghi has said he sees "encouraging signs of tangible improvements" in the UK economy"

    Waiting to see how the Beeb will put a negative spin on this tomorrow.

  • rate this
    0

    Comment number 162.

    lagarde must go, she is making the IMF an even bigger laughing stock than the EU Commission

  • rate this
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    Comment number 161.

    We now have a widening gap between rich and poor. When the poor get more money it quickly finds it's way back into the economy. When the rich get more money it is often locked into savings or foreign investments. Do economists recognise this?

  • rate this
    0

    Comment number 160.

    Ms Lagarde is currently giving evidence in a French court over allegedly dodgy transactions. After the DSK scandal, wouldn't you think the IMF vetting process would have improved?

    Who is the IMF to give its advice, "de haut en bas", as Ms Lagarde might say, to the UK?

  • rate this
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    Comment number 159.

    Spending too much isn't the problem: it's spending on the wrong things and buying them from the wrong people that puts us in the proverbial.

  • rate this
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    Comment number 158.

    Christine Legarde is an ex 'French Finance Minister. wonderfull CV
    would you not agree? Check her French legacy, triple dip recession and huge unemployment figures. Why should we listen to her lacklustre bunch of unexperts who are agreeing to billions in bailouts to that dead- duck called The Eurozone

  • rate this
    0

    Comment number 157.

    The Pareto principle is related to Pareto efficiency, introduced by economist Pareto who developed both concepts in the context of distribution of income and wealth among the population.

    80% of Italy's land was owned by 20% of the population. Surveys on a variety of other countries found to a similar distribution applied. He identified and codified the law of the jungle. He caused WWll.

  • rate this
    -1

    Comment number 156.

    (SF) suggests "we're not talking U-turns or a plan B ...There is much praise for the government here too." (source Stephanie Flanders) Why? praise the government. Let us look at the recent government performance.
    1. AAA credit rating down grade [FIRST SINCE 1978] 2.Taxing the poor (£9.51 a week bedroom benefit tax.3.Tax breaks for the rich.Credited to an under performing economy/chancellor.

  • rate this
    +1

    Comment number 155.

    @148.BluesBerry
    After all, IMF & WB are offspring of Bretton Woods Conference,

    Yes the end of the Bretton Woods system in 1971 effectively made the IMF redundant, their job had been to help countries maintain their fixed exchange rates, instead they changed their aim to helping countries 'cut public spending' regardless of whether it was a sensible approach for the country in question

  • rate this
    +2

    Comment number 154.

    What do the IMF know? Go back to their statements on the UK economy in late 2007. Makes for interesting reading.
    They are as clueless and partisan as the rating agencies.
    Slower deficit reduction = "kicking can down road". It is not rocket science. At least this government are tackling the problems head-on even if it hurts.

  • rate this
    +3

    Comment number 153.

    The Coalition has existed for three years, Stephanie, not several.

    The IMF is itself in a nuanced situation. It is telling France to cut spending and now it is telling the UK to borrow more. White man, forked tongue.

    Let us just remember the old joke that you could lay out all the economists in the world end to end and they would still never reach a conclusion.

  • rate this
    -1

    Comment number 152.

    Another article from the BBC editor which adds no value what so ever but simply regurgitates what someone else has said. Hasn't anyone at the BEEB noticed it is not getting value for money? And at least the economy has shown some growth - perhaps the acorn from which a great tree will grow.

  • rate this
    0

    Comment number 151.

    The IMF & WB, they're not called the economic hit men for nothing you know.

  • rate this
    +3

    Comment number 150.

    I wonder what ever happened to the 'V' shaped recovery that Stephanie used to write about.

    Not happening I guess.

    So much for accountability - the media endlessly calls for it from others - but never shows any itself.

    So are we blaming this 10 year depression solely on "the weather"?

    It's a reflection on the sad state of illumination in Britain

  • rate this
    -1

    Comment number 149.

    ".....the Fund has been saying for several years that the chancellor might have to slow the pace of deficit cuts if the economy continued to under-perform. In the staff's view, that day has now finally arrived......"


    Yet still the Tory boys pretend their work experience Chancellor is doing a good job.....massive inflation & lack of wage rises mean 90% of the country is now skint.....

  • rate this
    +2

    Comment number 148.

    Pardon my ignorance, if it is so; but I have never seen the IMF (or WB) intervene in any country & thereafter seen that country financially emerge for the better. Usually there follows additional privatization, less social programs & additional suffering.
    After all, IMF & WB are offspring of Bretton Woods Conference, 1944. Both organizations rely on SAPs.

  • rate this
    0

    Comment number 147.

    143.Movetoslovenia

    You're confused little man - they had 'cuts' - but as I tried to point out before you supported them - that these cuts will only cause increased costs elsewhere.
    ..and lo and behold.

    No wonder you're confused - it's hard to reconcile such ignorance when it comes to Government spending in a depression.

  • rate this
    +1

    Comment number 146.

    132.chinkinthearmour
    @129.Up2snuff
    yes, we might even suggest Howe's VAT jump was a stealth tax. Its one thing to invent it & another to overuse it.
    ~
    VAT is not a stealth tax.

    Is not 2013 the 20th anniversary of the Fuel Duty Escalator? Seem to recall other stealth & hidden taxes arising thru' 1990's, starting w/Major administration.

  • rate this
    +3

    Comment number 145.

    House Price Inflation V real wages decline(after inflation).

    Means more debt to buy houses this is not good for the Family,society or the country on any level

 

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