IMF's Christine Lagarde gives George Osborne his soundbite


Update added below at 11.50am

It was the soundbite of the chancellor's dreams. The head of the IMF said that when she looked back at the UK's deficit in May 2010 and imagined there being no plan to reduce it "I shiver".

This came after Christine Lagarde had backed "the policy mix" ie the combination of government tax and spending policies and the Bank of England's interest rate and quantitative easing policies.

In particular, she highlighted the fact that the government significantly slowed down its deficit reduction plans last autumn by extending the plans by two years - beyond the next election.

She said that the choice between deficit reduction and growth was a false one and called on Europe to boost growth by structural reforms, not by spending more.

The sting in the IMF tail appeared to be calls for the government and the bank to do more to protect the poor, get credit to business, invest more in infrastructure and, if growth continues to flatline, to consider a temporary cut in VAT in future.

I have not yet read the detailed IMF report. It is sure to contain more concerns which Labour can point to.

However Ed Balls may be left asking the question asked by my colleague Stephanie Flanders - given the IMF's been suggesting for two years that the UK deficit reduction policy should ease if growth has slowed and given that it's slowed to below zero, then when will it be time to consider a change?

Update 11.50am: Sure enough. Here's the key paragraph in the IMF report which Labour can quote - it holds out the future prospect of easing up on cuts or a temporary tax cut - like the VAT cut proposed by Ed Balls.

13. Fiscal easing and further use of the government's balance sheet should be considered if downside risks materialize and the recovery fails to take off. In particular, if growth does not build momentum and is significantly below forecasts even after substantial additional monetary stimulus and further credit easing measures, planned fiscal adjustment would need to be reconsidered. Under these circumstances, gains from delaying fiscal consolidation could be larger as multipliers are estimated to move inversely with growth and the effectiveness of monetary policy. To preserve credibility, reconsidering the path of consolidation should be in the context of a multi-year plan focused on further reducing the UK's large structural fiscal deficit when the economy is stronger and taking into account risks to sovereign borrowing costs. Fiscal easing measures in such a scenario should focus on temporary tax cuts and greater infrastructure spending, as these may be more credibly temporary than increases in current spending.

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  • rate this

    Comment number 253.

    So a French right of centre politician appears to support the policies of UK right of centre politicians, just at the point where France has a new left of centre president espousing slightly different policies. Well whaddya know. It's enough to give you the shivers.

  • Comment number 252.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 251.

    "I often wonder if this is all bluff and nobody really knows what they're doing."

    So true - uncharted waters in inclement weather, our very own Captain Ahab battling Moby Dick.

  • rate this

    Comment number 250.

    All that 'Chillaxing' doesn't seem to have worked for Dave judging by his tetchy responses at PMQ's. Even a lukewarm endorsement from Lagarde (thanks for voting for me and for the extra billions) hasn't lifted his mood. Must have been those references to Vat cuts, going more slowly,etc. No wonder the Idiot was gibbering. Lamont gets it. Effectively we are in plan B and Christine is trailing Plan C

  • rate this

    Comment number 249.

    215.Dr Bob Matthews
    I would like to refer you to the wonderful comment the Prime Minster made today in PMQ's about my best mate (not!).

  • rate this

    Comment number 248.

    Christine Lagarde speech is a bit like the Nostra damus predictions. vague catch all statements that only become predictions with the benefit of hindsight. Is this how economic prediction works? I often wonder if this is all bluff and nobody really knows what they're doing.

  • rate this

    Comment number 247.

    nautonier @245
    "no long term plan"

    Fair in a way, for which thanks

    People, firms, departments, had plans, but only hazy or plain wrong 'strategic vision'

    Head & heart & hands, believed together in war, drifted apart as union struggle & employer reaction displaced post-war hopes

    Capital, 'entitled', lazy, disheartened, 'owned' by 1%, fled 'the community'

    To "Why not finish the job?"

  • rate this

    Comment number 246.

    "carefully targeted"

    No monopoly, & circumstances change

    Times to invest, sometimes counter-cyclical through debt, in schools for future

    Sometimes in aircraft carriers, at least two, with planes

    If of course might be something or someone to defend somewhere sometime, humanitarian or commercial, 'in our interest'

    Mark Urban quotes of 2010 'grown-up' SDSR: "hopeless shambles"

  • rate this

    Comment number 245.

    Reasons for substantial decline of UK manufacturing sector between 1960 & 1980's are many and varied. Heavy industry had been in decline since WW2 & business owners simply sold up as Britain became less well educated in tech., more millitant & unionised & more overseas competition. Business owners e.g. moved their capital overseas & into finance - UK had no strategic long term plan for UK industry

  • rate this

    Comment number 244.

    217.Dr Bob Matthews
    it is a euphenism for DEVALUATION, but the Tories would be terrified of using the word devaluation,

    BoE has devalued GBP by about 20% over last few years against eg US $ & so 'devaluation' is no secret as what has also kept UK inflation higher in recent years due to UK being net importer.
    What matters is not the amount of UK 'growth' but the 'quality' of UK 'growth'

  • rate this

    Comment number 243.

    "241 - But my point is different: if buyers acted on all the 'warnings' in surveyors' reports there'd be no UK housing market, would there?"

    Depends on the warning.

    If the report said that "Brown The Builders" had built the house without foundations and on sand, then a wise purchaser would indeed take notice. Certainly the builder would be a fool to build more houses on the same model

  • rate this

    Comment number 242.


    Point is - you have gone off from the 'discussion' on 'growth'.
    UK political system is ridiculous as the GDP definition of growth is so broad as to enable a govt to make serious mistakes & then rob taxpayers blind & call cleaning up the mess 'growth' - that is the Labour definition of growth
    Labour profligate spending growth - v - carefullly targeted spending growth

  • rate this

    Comment number 241.

    JH 238

    That's not really what I meant, John. Actually I think the decline in manufacturing (under Lab and Con) tends to be overstated: the sector's increasing efficiency is more likely to lead to lower output prices than is the case with services.

    Andy 236

    But my point is different: if buyers acted on all the 'warnings' in surveyors' reports there'd be no UK housing market, would there?

  • rate this

    Comment number 240.

    If these chancellors / Ministers / Prime Ministers etc. were tradesmen we would not pay them for their shoddy work and would most probably demand compensation for our loss.

    So why don't we . What would the process be ?

    I realy do think that it is laughable that these workmen in error get golden hand shakes and probably the best pension terms available for any one in the UK.

  • rate this

    Comment number 239.

    Revealing list, taken on trust!

    But @237, echoing john@232, inviting disregard

    Experience, interest, statistics, sharp argument all appreciated

    But unless 'here' just to take sides in deemed-profitable civil war, need to find common ground upon which to enjoy lives 'skilled, motivated, profitable, supportive of democratically decided infrastructure', neither 'left' nor 'right'

  • rate this

    Comment number 238.

    #235 saga: "Ah but there's manufacturing and manufacturing"

    Indeed. There's Conservative manufacturing, employing a skilled and motivated workforce, profitable, and contributing to the exchequer.

    And there's Labour manufacturing (e.g. British Leyland), employing a unionised workforce ready to strike at a moment's notice, unprofitable, and requiring ever increasing levels of public subsidy.

  • rate this

    Comment number 237.

    232 - It's the same with mining, John. Listen to Labour's history revisionists and you'd think a strong, expanding mining sector was destroyed by Mrs T. Yet mining output fell 45% in the 11 years before Mrs T, 33% when Mrs T was PM, 72% in the 11 years after her and 64% in the 11 years after that. Jobs in mining HALVED in the 15 years BEFORE Mrs T became PM.

  • rate this

    Comment number 236.

    235 - "they're 'warnings' in the same (non) sense as your typical house-buyers' survey: droning on about stuff in a manner so self-justifying and densely caveated as to be devoid of meaning or practical use."

    And yet they were all correct.

    I'm guessing Brown adopted your approach of bluster and denial when faced with the same warnings. That didn't end too well, did it?

  • rate this

    Comment number 235.

    andy 223

    A long list indeed but which only supports my point, they're 'warnings' in the same (non) sense as your typical house-buyers' survey: droning on about stuff in a manner so self-justifying and densely caveated as to be devoid of meaning or practical use. Going through the motions.

    JH 232

    Ah but there's manufacturing and manufacturing. The latter did take a big hit under Maggie.

  • rate this

    Comment number 234.

    "confronted with numbers"
    Part overshadowed in GDP by invisibles growth

    On fundamentals, of principle, long-run cohesion, viability:

    Not to 'defend' Blair debt bubble - naive & not-so-naive 'faith' in power & bonuses - but 'I was there' at 'political destruction' of 1980s, by unholy alliance of 'differential defenders', right & left

    Net sacrifice of skills & national interest


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