The IMF's warnings to Osborne

Tax cuts and further QE will be needed if growth remains weak, says the IMF.

The IMF's latest assessment of the British economy is in and although the body has once again endorsed Osborne's Plan A, it does so with several notable caveats. Ajai Chopra, the IMF mission chief to the UK, writes in a blog that the government should respond quickly with "further quantitative easing" and "temporary tax cuts" if it looks as though the economy is headed for a "prolonged period of weak growth, high unemployment and subdued inflation." It's important to add that the IMF says it currently doesn't expect this happen but Vince Cable - who has called for "more radical" forms of QE - may have found an ally.

Then there's the fact that the body says Osborne could miss his target of eradicating the structural deficit by the end of this Parliament. It forecasts that "the cyclically-adjusted current budget" will "just reach balance" in 2015-16 (a year later than Osborne expects) but adds that there is "little margin for error".

In perhaps the most important passage in the document, the IMF notes that "consolidation has so far relied heavily on tax hikes and the phase-out of stimulus. As consolidation becomes more reliant on structural spending cuts going forward, implementation challenges may rise." In other words, deficit reduction could become even harder as the cuts come to dominate (Osborne split the pain 73:27 between cuts and tax rises).

But what of the implications for growth? It's worth highlighting another IMF study which found that, contrary to neoliberal wisdom, austerity programmes invariably lead to reduced output. The body looked at 170 examples of fiscal policy stretching back to the 1930s and concluded: "Our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP."

George Osborne has consistently argued that the cuts will increase confidence and that excessive state spending is "crowding out" private investment. But the IMF's conclusions suggest that "expansionary fiscal contraction" is, in the words of Larry Summers, "every bit as oxymoronic as it sounds".

George Eaton is political editor of the New Statesman.

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Quiz: Can you identify fake news?

The furore around "fake" news shows no sign of abating. Can you spot what's real and what's not?

Hillary Clinton has spoken out today to warn about the fake news epidemic sweeping the world. Clinton went as far as to say that "lives are at risk" from fake news, the day after Pope Francis compared reading fake news to eating poop. (Side note: with real news like that, who needs the fake stuff?)

The sweeping distrust in fake news has caused some confusion, however, as many are unsure about how to actually tell the reals and the fakes apart. Short from seeing whether the logo will scratch off and asking the man from the market where he got it from, how can you really identify fake news? Take our test to see whether you have all the answers.

 

 

In all seriousness, many claim that identifying fake news is a simple matter of checking the source and disbelieving anything "too good to be true". Unfortunately, however, fake news outlets post real stories too, and real news outlets often slip up and publish the fakes. Use fact-checking websites like Snopes to really get to the bottom of a story, and always do a quick Google before you share anything. 

Amelia Tait is a technology and digital culture writer at the New Statesman.