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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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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