Christine Lagarde's attack on Osbornomics is damning

The new IMF boss's comments make awkward reading for George Osborne.

On 6 June 2011, George Osborne said that he had been "vindicated" in a debate over spending cuts after the International Monetary Fund backed his austerity measures. Launching the fund's annual assessment at the Treasury, the Chancellor positively swooned over the verdict and the acting managing director of the IMF John Lipsky's support for his failing policies.

"The IMF have publicly asked themselves the question of whether it is time to adjust macroeconomic policies -- in other words, 'Is it time to change course?'" he said. "They have concluded definitively that the answer is no.''

Today's developments suggest that if there ever was any vindication, which was never credible of course, it has now fled.

To be fair to the IMF, the original report did warn that:

If the economy experiences a prolonged period of weak growth and high unemployment . . . then some combination of the following would need to be considered: (i) expanded asset purchases by the Bank of England and (ii) temporary tax cuts. Such tax cuts are faster to implement and more credibly temporary than expenditure shifts and should be targeted to investment, low-income households or job creation to increase their multipliers.

This has now happened as growth disappoints.

Today's release of growth data for the second quarter of 2011 from Europe were scarily bad with the eurozone economy growing only 0.2 per cent and there may well be worse to follow. This is the smallest increase since the recovery began in the third quarter of 2009. This is bad for UK growth -- which was also 0.2 per cent for the second quarter of 2011 -- given our dependence on exports to the slowing euro area.

Growth has slowed sharply from the 0.8 per cent increase seen in the first quarter. Growth in France and Portugal was zero, while Germany grew by only 0.1 per cent, compared with market expectations of 0.5 per cent. The Netherlands (0.1 per cent), Italy (0.3 per cent) and Spain (0.2 per cent) also showed very little growth.

As can be seen below the UK has performed badly compared to our European counterparts for whom we have complete data. Based on data for the last three quarters, which is how the table is presented, the UK ranks next to last ahead only of Portugal and tied fourth from last with Italy using data for the last four quarters, ahead of Portugal, Romania and Spain. No vindication here George, I'm afraid.

 

According to a Treasury spokesman, Osborne chatted with Christine Lagarde, the new managing director of the IMF, while he was on his holidays in Hollywood. I suspect Slasher wasn't too happy about what she said, given his frequent claims that the IMF, Uncle Tom Cobley and all supported his misguided and disastrous macroeconomic policy.

Writing in today's Financial Times, Lagarde argues that deficit-reduction plans must not harm growth as the austerity programme clearly is doing in the UK. She writes:

For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans. At the same time, we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. So fiscal adjustment must resolve the conundrum of being neither too fast nor too slow . . . What is needed is a dual focus on medium-term consolidation and short-term support for growth and jobs.

That may sound contradictory but the two are mutually reinforcing. Decisions on future consolidation, tackling the issues that will bring sustained fiscal improvement, create space in the near term for policies that support growth and jobs. By the same token, support for growth in the near term is vital to the credibility of any agreement on consolidation. After all, who will believe that commitments to cuts are going to survive a lengthy stagnation with prolonged high unemployment and social dissatisfaction?

I could have written this.

Recall that Osborne opposed Gordon Brown's candidacy and supported Lagarde's in the job, so this is highly embarrassing.

Commenting, Ed Balls, Labour's shadow chancellor, said:

The slowdown of a number of European economies is obviously a serious cause for concern. The Managing Director of the IMF, Christine Lagarde, is right to say that "slamming on the brakes too quickly will hurt the recovery and worsen job prospects". The evidence for George Osborne's claim that Britain is a safe haven has collapsed and his dangerous complacency is being exposed. That is why the Chancellor should take heed of the IMF's latest advice. The IMF were right to warn George Osborne a few months ago that he would need to change course if the UK continued to stagnate. His decision to continue to ignore wise advice is not just complacent it is deeply reckless -- a dangerous gamble with jobs, investment and living standards, too.

Osborne's claim that his policies have succeeded because of the fall in bond yields looks like a stretch, given -- as Peter Tasker noted in the FT last week -- that no OECD country that issues its own currency is suffering from rising borrowing costs. The IMF does not support the coalition's failing economic policies. Vindicated my foot. It's time to stimulate growth and jobs.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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There is nothing compassionate about Britain’s Dickensian tolerance of begging

I was called “heartless” for urging police to refer beggars to support services. But funding drug habits to salve a liberal conscience is the truly cruel approach.

In Rochdale, like many other towns across the country, we’re working hard to support small businesses and make our high streets inviting places for people to visit. So it doesn’t help when growing numbers of aggressive street beggars are becoming a regular fixture on the streets, accosting shoppers.

I’ve raised this with the police on several occasions now and when I tweeted that they needed to enforce laws preventing begging and refer them to appropriate services, all hell broke loose on social media. I was condemned as heartless, evil and, of course, the favourite insult of all left-wing trolls, “a Tory”.

An article in the Guardian supported this knee-jerk consensus that I was a typically out-of-touch politician who didn’t understand the underlying reasons for begging and accused me of being “misguided” and showing “open disdain” for the poor. 

The problem is, this isn’t true, as I know plenty about begging.

Before I became an MP, I worked as a researcher for The Big Issue and went on to set up a social research company that carried out significant research on street begging, including a major report that was published by the homeless charity, Crisis.

When I worked at The Big Issue, the strapline on the magazine used to say: “Working not Begging”. This encapsulated its philosophy of dignity in work and empowering people to help themselves. I’ve seen many people’s lives transformed through the work of The Big Issue, but I’ve never seen one person’s life transformed by thrusting small change at them as they beg in the street.

The Big Issue’s founder, John Bird, has argued this position very eloquently over the years. Giving to beggars helps no one, he says. “On the contrary, it locks the beggar in a downward spiral of abject dependency and victimhood, where all self-respect, honesty and hope are lost.”

Even though he’s now doing great work in the House of Lords, much of Bird’s transformative zeal is lost on politicians. Too many on the right have no interest in helping the poor, while too many on the left are more interested in easing their conscience than grappling with the hard solutions required to turn chaotic lives around.

But a good starting point is always to examine the facts.

The Labour leader of Manchester City Council, Richard Leese, has cited evidence that suggests that 80 per cent of street beggars in Manchester are not homeless. And national police figures have shown that fewer than one in five people arrested for begging are homeless.

Further research overwhelmingly shows the most powerful motivating force behind begging is to fund drug addiction. The homeless charity, Thames Reach, estimates that 80 per cent of beggars in London do so to support a drug habit, particularly crack cocaine and heroin, while drug-testing figures by the Metropolitan Police on beggars indicated that between 70 and 80 per cent tested positive for Class A drugs.

It’s important to distinguish that homelessness and begging can be very different sets of circumstances. As Thames Reach puts it, “most rough sleepers don’t beg and most beggars aren’t rough sleepers”.

And this is why they often require different solutions.

In the case of begging, breaking a chaotic drug dependency is hard and the important first step is arrest referral – ie. the police referring beggars on to specialised support services.  The police approach to begging is inconsistent – with action often only coming after local pressure. For example, when West Midlands Police received over 1,000 complaints about street begging, a crackdown was launched. This is not the case everywhere, but only the police have the power to pick beggars up and start a process that can turn their lives around.

With drug-related deaths hitting record levels in England and Wales in recent years, combined with cuts to drug addiction services and a nine per cent cut to local authority health budgets over the next three years, all the conditions are in place for things to get a lot worse.

This week there will be an important homelessness debate in Parliament, as Bob Blackman MP's Homelessness Reduction Bill is due to come back before the House of Commons for report stage. This is welcome legislation, but until we start to properly distinguish the unique set of problems and needs that beggars have, I fear begging on the streets will increase.

Eighteen years ago, I was involved in a report called Drugs at the Sharp End, which called on the government to urgently review its drug strategy. Its findings were presented to the government’s drugs czar Keith Hellawell on Newsnight and there was a sense that the penny was finally dropping.

I feel we’ve gone backwards since then. Not just in the progress that has been undone through services being cut, but also in terms of general attitudes towards begging.

A Dickensian tolerance of begging demonstrates an appalling Victorian attitude that has no place in 21st century Britain. Do we really think it’s acceptable for our fellow citizens to live as beggars with no real way out? And well-meaning displays of “compassion” are losing touch with pragmatic policy. This well-intentioned approach is starting to become symptomatic of the shallow, placard-waving gesture politics of the left, which helps no one and has no connection to meaningful action.

If we’re going make sure begging has no place in modern Britain, then we can’t let misguided sentiment get in the way of a genuine drive to transform lives through evidenced-based effective policy.

Simon Danczuk is MP for Rochdale.