The Staggers

The New Statesman’s rolling politics blog

IMF warns that Osborne may need to delay cuts

UK should consider slowing "planned adjustment" if growth continues to disappoint, says the IMF.

By George Eaton Published 20 September 2011 16:18

It's only Tuesday but this has already been a bad week for George Osborne. Yesterday it emerged that the structural deficit could be £12bn higher-than-expected, now the IMF, hitherto a strong supporter of the Chancellor's economic strategy, has slashed its growth forecasts for the UK, and has warned that Britain, the US and Germany (all countries where governments can borrow at historically low rates) should "consider delaying some of their planned adjustment" if growth continues to fall short of expectations. In other words, Osborne might well need a "plan B".

Just a month ago, the IMF said that the UK should only consider slowing its deficit reduction plan if it looked as though the economy was headed for a "prolonged period of weak growth, high unemployment and subdued inflation." But now it suggests that weaker-than-expected growth would be justification enough. The consensus, however slowly, is beginning to turn against Osborne and against extreme austerity.

The IMF now predicts that the UK will grow by just 1.1 per cent this year (down from an earlier forecast of 1.5 per cent) and by 1.6 per cent in 2012 (down from 2.3 per cent). If the fund is right, growth will be worse than in 2010 and significantly lower than the OBR's forecast of 1.7 per cent. The IMF has now cut its 2011 UK growth forecast four times in the last year (from 2 per cent, to 1.7 per cent, to 1.5 per cent, to 1.1 per cent). There is every likelihood that it will do so again. The "grey skies" that Vince Cable spoke of yesterday are looking even greyer today.

Special Offer: Get 12 issues of New Statesman magazine for just £12

Tags: Spending Cuts George Osborne

More from George Eaton

26 comments

Wed, 2011-09-21 15:04 — Indu Pendent (not verified)

@matt

Foxy, head stuck in hole (fox hole) as usual.

You would not like the OBR - it is transparent and provides people with a target to criticise the government. Why on earth would any government give people tools to hold the government to account with. Full understand that Labour -- which does not believe in one member one vote democracy -- would kill off the OBR.

BTW, has your mind be made up for you yet - should government borrowing be increased or decreased?

Wed, 2011-09-21 15:19 — Indu Pendent (not verified)

Please can someone remind me

1) what Labour spent the £350Bn on that they borrowed before 2008. The money still needs to be repaid and there is no benefit e.g. getting on for 1 in 2 people are let down by the education systems which does not give them a proper education in maths and english (the same system has been proven by the leading state schools to level down the top third of people)

2) Which party is responsible for incompetently managing the economy and leaving behnd the UK's biggest peace time structural deficit which we are still discoverring the depth of the mess they made?

3) which shadow chancellor was a supporting architect to Labour's economic policies (i.e. the policies that Alistair said were not credible)?

4) How many private sector jobs did the last government destroy and replace by extra public sector jobs?

5) Supposing I doubled what I owe to a bank and then doubled it again so that I owe £2,000,000,000,000. I then borrow and extra £250Bn. How much will I leave behind owing for my kids to repay?

6) Why has Labour got it in for UK industry so much? e.g. they do not believe in low company and jobs taxes.

Wed, 2011-09-21 15:33 — Dave C (not verified)

Indu wrote,

"Please can someone remind me what Labour spent the £350Bn on that they borrowed before 2008?"

For a start, how about £92billion rescuing Northern Rock in 2007?

You may have forgotten but it was in all the papers. http://www.dailyrecord.co.uk/news/business-news/2008/05/22/cost-of-baili...

Wed, 2011-09-21 17:08 — rob andersen (not verified)

dave c
your article is for may 2008, indu asked before 2008.
From newswires this morning:
‘banks in Spain and Italy are curbing loans and charging customers more as aftershocks from the sovereign debt crisis drive their borrowing costs higher.’
They then cite a pumps and filter maker who wanted to borrow a pump and filter maker who wanted to expand but coudn’t cos the loan was to expensive.
Currently in the UK u can now get a 10 year fix mortgage at UNDER 4%!! Never been offerd at that rate.
Then bear in mind 250k private sector job creation in the last year, stabilised numbers in a torrid backdrop, has a plan with some inbuilt flexibility (nothing else been put forward), and has made Britain a safe haven currently. Look at the backdrop, and the headline "MAY need to delay cuts" MAY. So if things deteriorate further, than we might see what some of the inbuilt flexibilty is. 205 pay cuts in greec whilst SIMULTANEOUSLY enforcing taxes, 20% pay cuts in Ireland, 20% unemployment in spain with 40% in some areas. In the US where dole claimants aren't counted after a short while, estimates that US unemployment more like 15% despite having just spent 15 trillion. Left foot forward suggesting in one article that 50p rate might be cutting off nose to spite fate.
And what do i find here? a load of class conscious bahoo to you he's an eton tosser comments... this site, the 'progressive' left one poster described it to me as...well all i see is hate and petty class jealousy, calling the man a coke head, moron etc... based on nothing. No maths, no knowledge, just hate...
left foot forward- much more intersting, less anger...

Wed, 2011-09-21 17:54 — matthew fox (not verified)

Indu Pendent, have you got around to showing the criticism from Lagarde and the credit rating agencies regarding public sector pensions?

Is this another schoolboy error being added to the tally?

Wed, 2011-09-21 18:05 — Dave C (not verified)

rob andersen

Northern Rock crashed and was rescued in 2007. The date of the article is irrelevant.

Sun, 2011-09-25 18:26 — matthew fox (not verified)

@Dave C

Don't waste your breathe, it took Indu Pendent months to acknowledge Thatcher and Major where bankrolled by North Sea Oil.

The party of tax, spend and borrow, blew £350 Billion of NSO revenue, and for an encore, borrowed hundreds of billions.

Please don't forget Ken Clarke levied VAT on electricity and gas bills , for some reason, Indu Pendent is under the impression, that was progressive in nature.

Wed, 2011-09-21 20:13 — Indu Pendent (not verified)

Dave C

To clarify, the £350Bn I am talking about is borrowing before any bank bailout. Labour doubled the national debt in addition the bailing out the banks.

Dindnt you know that or have you been brainwashed into believing it never happen? Or do you know it and are going with the flow and pretending it never happended.

It is Labour policy to keep it out of the media by blaming everything on the bank crisis which is a lie -- brazenly opaque, deceitful, unaccountable, all part of the corrupted culture. Didnt you know that either?

The banking crises added significantly to the national debt and together with the continued massive borrowing from 2008 to fund Labour's fiscal policy it doubled the national debt a second time.

That right - got it now -- Labour quadrupled the national debt. The true situation is worse because the full value of Labour's the off-the-balance sheet debt is not known. Its inconceiveable how such a corrupt government ever got into power. It relies on zombie voters.

Tue, 2011-09-20 17:16 — Daniel (not verified)

Don't worry. Osbourne won't be listening. I have never come across such a fuck-witted chancellor as Osbourne. A revolution needs men like Osbourne.

Tue, 2011-09-20 17:26 — G.Day (not verified)

Fuck witted. Would you like to elaborate on that phrase.

Tue, 2011-09-20 17:42 — Dave S1

Fuck-witted? I can help you there...a bit like George Osborne really. Hope that helps.

Tue, 2011-09-20 17:53 — swatantra nandanwar

At the risk of embarrassing myself I'd say that Britain is back in recession, as some members of the IMF believe. And, that the IMF seem to be going along with what Balls has been saying about the severity of the cuts. But only next months figures will confirm this.

Tue, 2011-09-20 18:06 — pjwall (not verified)

Knowing Gideon he`ll look at this report with that moronic, vacant, condescending grin, then he`ll allegedly sniff some cocaine, and finally have a W#nk into it!!!. we`re all so lucky to have to have the economic duo of Gideon, and Alexander!!, safely guiding the UK economy into the rocks!!, We`re the envy of the world!.

Tue, 2011-09-20 18:11 — Dave C (not verified)

Osbo will just carry on as before, blaming everything on events abroad and nothing on his own policies.

Tue, 2011-09-20 18:46 — Mike S (not verified)

And if ever hairier shirts are not the answer, why are they still to be imposed everywhere else?

Tue, 2011-09-20 19:11 — matthew fox (not verified)

The OBR just can't get it right, time after time, they are being the curve.

Mon, 2011-09-26 07:53 — Colin Sloss (not verified)

All this about Matt and Indu I have much more important business I once loved a woman called Catherine, I suppect John spoiled that. The thing is I still do. Although my wife 'Oh the fat woman' and tho she had 4 kids. I remember how she looked so lovely in that Ranmoor mirror. I will never forget it.

Tue, 2011-09-20 19:18 — matthew fox (not verified)

" Planned Adjustment " means U-turn, bin Plan A and pray for forgiveness.

Thu, 2011-09-22 06:32 — Colin Sloss (not verified)

Indu I think you are wrong and getting despperate.

Thu, 2011-09-22 08:58 — Barny

@ Rob
Class hate as opposed to class envy is right and will get more intense. The Tories can no longer even try and sell themselves as a benevolent patrician governing class who hold the land and levers of government 'in trust' for the good of the entire country. It is quite clear that they are 1) 'fences' to the rich and voracious capitalists and 2) really crap managers in the business of government.

People, and I'm talking ordinary middle of the road unpoliticised people, are furious with this. This is not the politics of envy. It is the politics of despising greedy no marks who have no integrity.

Fri, 2011-09-23 12:47 — Dave C (not verified)

Indu,

You talk as if deficits were unique to Labour. Take a look at: http://www.guardian.co.uk/news/datablog/2010/oct/18/deficit-debt-governm...

You'll see that between 1979 and 2010, there have only been two periods of surplus: 1988-9 (under Major) and 1998-2001 under Labour.

Tue, 2011-09-20 22:11 — John (not verified)

Can the Eurozone take action to increase growth over the next two years and beat the newly lowered expectations, or will the Eurozone still manage to fall below the new expectations?

http://www.benzinga.com/news/11/09/1930750/imf-says-world-economy-is-kin...

Tue, 2011-09-20 22:39 — Anton Jury (not verified)

Would you believe it ! This is what everyone has been saying all along.

Mervin King warned before the 2010 general election that the Tories were financially inexperienced and basically not to be trusted with the British economy. As it turns out that a bunch of them used to be drug users, George Osborne included.

Then Sorros warned at the World Economic Forum in Europe last year that George Osborne's and David Cameron's deficit deduction plans and Austerity measures were seriously dangerous to the British economy.

The Labour Party and many other economist warned that George Osborne's deficit deduction plans were outright dangerous.

So it appears that everyone knew that George Osborne was economically illiterate and a danger to the British economy and now the IMF has woken up to that fact after colluding with George Osborne only a couple of months ago.

George Osborne should get a job more suited to his lifestyle and abilities away from his mates in Government that are embarking on wrecking everyone elses life.

Fri, 2011-09-23 12:59 — Amergin

Fuckwit= smirk + sub normal intelligence+ expensive private education+ rich daddy.
The man is deplorable,vain,without intelligence, self -congratulory ( Look at me Daddy, I'm the Chancellor!). Lord, what have we allowed to happen to us?