Balls says cuts plan 'not working' despite IMF backing
- 6 June 2011
- From the section UK Politics
Shadow Chancellor Ed Balls has dismissed the International Monetary Fund's backing for the coalition's deficit reduction strategy.
He said Chancellor George Osborne "should not take too much comfort" from the IMF's report.
And the Labour MP repeated his call for Mr Osborne to slow the pace of cuts.
The IMF cut its growth forecast for the UK economy - but said the coalition did not need to change course on economic policy.
The report is being seen by some as a vindication for Mr Osborne, who has been forced to downgrade his growth forecasts in the face of a weaker-than-expected recovery.
The chancellor has rejected calls from Labour and some economists to draw up a "Plan B" to his package of spending cuts and tax rises which are designed to eliminate the structural deficit by 2015.
But Mr Balls said "all the evidence" pointed to the fact that the cuts programme had contributed to weak growth over the past six months and resulted in borrowing being £46bn higher than a year ago.
"By cutting too far and too fast, I believe he is creating a vicious circle," Mr Balls told the GMB trade union's annual conference.
"That vicious circle is more people out of work, on benefits, making it harder to get the deficit down."
He said Labour - which wants to halve the deficit over four years - offered a "more balanced alternative approach to the deficit which would put jobs first".
Responding to the IMF's annual assessment of the UK economy, which concluded that weak growth and rising inflation had been "unexpected" but it believed "largely temporary", he told BBC News: "The IMF is now saying they hope this is just a temporary blip.
"But I fear by going this far and fast, George Osborne is making it harder to get the deficit down.
"I think the cautious thing for him and the IMF to be saying today is not 'cross our fingers and hope for the best' but to say the evidence says it is not working and now is to the time to change course before it is too late."
Mr Osborne has said the UK has the backing of leading international experts, as well as the financial markets and main UK business groups, for his deficit reduction plan.
Speaking before the IMF published its assessment, he said the economy was growing and jobs were being created.
"We would like the economy to grow even further," he told the BBC.
"We would like more jobs to be created. But, the rock upon which the stability of the British economy rests at the moment is our credible fiscal plan."
Michael Fallon, Conservative deputy chairman, said the UK "did not have the luxury" of a Plan B and the IMF had concluded that the deficit strategy was "on track".
"We have to stick to the original plan," told the BBC News Channel.