IMF: Britain should consider "flexibility" in Plan A

"Consideration should be given to greater near-term flexibility in the fiscal adjustment path."

The IMF has cut its forecasts of UK GDP growth in 2013 and 2014 by 0.3 percentage points for each year, to 0.7 and 1.5 per cent respectively. The figure for 2013 is still 0.1pp above the OBR's own forecast for 2013, but where the OBR sees growth picking up rapidly – rising to 1.8 per cent in 2014, and then 2.8 per cent by 2018  the IMF is predicting a slower recovery.

The predictions come from the Fund's World Economic Outlook, its biannual publication looking at the global economic situation. Writing about the UK, the WEO says;

The recovery is progressing slowly, notably in the context of weak external demand and ongoing fiscal consolidation… Domestic rebalancing from the public to the private sector is being held back by deleveraging, tight credit conditions and economic uncertainty, while declining productivity growth and high unit labour costs are holding back much needed external rebalancing…
Consideration should be given to greater near-term flexibility in the fiscal adjustment path.

Merely calling for "consideration" to be given – rather than a demand for immediate "flexibility in the fiscal adjustment path" – provides an out, of sorts, for the Government. Expect to hear the chancellor confirming that he has "considered" the IMF's advice, but decided not to act on it, due to (something). Indeed, the FT cites Treasury sources already spinning the news, claiming the word choice "showed the fund was still sitting on the fence."

But as the Guardian reports, Oliver Blanchard, the Fund's Chief economist, did tell a press conference in the US today that:

The IMF would hold talks with the UK government in the coming months, to "see what can be done" about the pace of deficit reduction.
"In the face of very weak private demand it is time to consider adjustment to the original fiscal plan," Blanchard explained.

The WEO was more positive about the monetary side of the chancellor's record. Although it cautions that the Bank of England may find it hard to unwind the positions it has taken throughout four years of QE, which might force it to face significant trade-offs when it comes to fighting inflation in the future, it also praises the overall strategy of "monetary activism with fiscal responsibility and supply side reform".

That advice goes against the intervention of former MPC member Adam Posen, who today warned of the limits of Mark Carney's potential as Bank of England governor. But it gives Osborne enough cover to struggle on for a while longer.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.