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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Far from being a leftwing radical, Jeremy Corbyn is slouching towards Milibandism

Most of the Corbynite agenda can be found in the pages of Britain Can Be Better, the party’s 2015 manifesto.

A pair of boxing gloves hangs in the office of Benoît Hamon, the Socialist candidate for the French presidency – not because the diminutive left-winger faces a fight to keep his party relevant, let alone in government (some surveys show him in fifth place), but because of his affection for Muhammad Ali, whose poster adorns one of the walls of his sophisticated, modern office. During his against-the-odds run for the Socialists’ presidential nomination, he likened himself to Jeremy Corbyn, as did his opponents. Though the comparison added a note of optimism to his long-shot bid, now that he is ensconced at the top of his party it is Corbyn, rather than Hamon, who is flattered by the comparison.

A casual observer of Hamon’s open-plan headquarters in Château d’Eau, a gentrify­ing area near the centre of Paris, might mistake it for the home of a tech start-up rather than that of a party that is more than a century old. Someone visiting Corbyn’s offices at Norman Shaw South in the Palace of Westminster, or the Labour Party’s headquarters a few minutes down the road, would have no such difficulties.

Although the demolition of its Miliband-era offices forced the move to the new digs, Labour’s organisational structures and campaigning approach remain firmly rooted in the world that Ed Miliband built. The offices of the leader of the opposition, too, are little changed since Miliband vacated them.

It’s not only the buildings that have a Miliband-era look to them. Labour’s policies do, too. For all that Corbyn is battered in the right-wing press for his “hard-left” past, his present is mired in the programme of his predecessor.

Most of the Corbynite agenda can be found in the pages of Britain Can Be Better, the party’s 2015 manifesto. A pledge to ban zero-hours contracts appears on page 27. A commitment to undo the Conservatives’ reforms to the National Health Service is on page 34, and a pledge to ensure parity of esteem for physical and mental health treatment is on the following page.

To address Britain’s housing crisis, the party leader has pledged to build 200,000 homes, the same commitment as Miliband and Theresa May made. On immigration, meanwhile, Labour remains mired in its Miliband-era rut: desperate to avoid upsetting the half of its coalition that likes immigration or the half that opposes it, the party settles for offending both with an incoherent mess.

Corbyn’s Labour has a more expansive ­fiscal rule allowing it to spend more on infrastructure than the Labour of Miliband and Ed Balls would have done but, on taxation, the party has moved significantly since the era of Balls – to the right.

The promise of Jeremy Corbyn’s leadership bid was “a new kind of politics”. Corbyn’s claim to be to the left of what came before him rests largely on his career before becoming leader and his rhetoric, rather than the programme that he has advanced since becoming leader.

Here, Corbyn’s allies point to the oppo­sition of much of the Parliamentary Labour Party. Hamon, too, has to navigate a political elite that mostly backed his defeated opponent Manuel Valls, but has carved out a distinctive policy platform offering a universal basic income and pledging to legalise both cannabis and euthanasia.

The Labour leader’s office, meanwhile, can no longer claim to be understaffed. Ed Miliband had a staff of 25. Corbyn has one of 28, with four posts still to be filled. Although Miliband’s journey ended in electoral defeat, his leadership was at least an incubator for ideas about the future of the party, admittedly sometimes to the extent that his office more closely resembled a seminar room than a platform to seize power in a general election. There are serious thinkers in the current leader’s office, but the whole is less than the sum of its parts.

Corbyn has proved to be a more adept player of the game of Labour politics than his opponents as far as retaining the leadership is concerned, and yet he cannot be said to have been a success in terms of transforming the Labour Party. A minister from the Tony Blair years describes Corbyn’s victory as a necessary “course correction” from the excesses of the latter years of New Labour and the arid unity of the Miliband era, but the truth is that Labour’s plane remains on the same trajectory that it was on when Corbyn took the controls.

Beyond the leader’s office, Labour’s left flank has shrunk under Corbyn. Fourteen of the 35 Labour MPs who signed Corbyn’s nomination papers could be described as sharing his politics. Today, the Corbynite caucus numbers just 13, as the late Michael Meacher, an eloquent supporter of Corbynism, has been succeeded in Oldham by Jim McMahon, a rising hope of the party’s right. If Clive Lewis, who is still regarded as the left’s best asset by many activists but is currently on the outside as far as the leadership is concerned, is counted out, the Corbynite caucus goes down to 12.

The struggles of Labour’s French cousins and, indeed, of most centre-left parties everywhere – the centre left has won just seven elections in the EU since the financial crash – show that the party’s problems do not begin or end with Corbyn. But, two years in, it is difficult to see which of those problems are improving under him and easy to identify the ones that are getting worse.

On the periphery of the Corbyn project, there is worthwhile work being done on the digital economy and the party’s structure; the latter has not been the subject of deep thinking since 1997. Yet those green shoots are likely to remain neglected until the leader’s successor, whoever that may be, inherits, just as Corbyn did from Miliband, a party that is weaker at Westminster than it was when he or she found it. And that, regrettably, is the optimistic scenario.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition