Until recently, George Osborne was fond of boasting that his side had the support of “the IMF, the OECD, the credit rating agencies, the bond markets, the European Commission”. But after seeing the results of austerity in Britain and the eurozone, all of these groups have changed tack.
Here’s the key passage from today’s IMF report:
Those [advanced countries] with very low interest rates or other factors that create adequate fiscal space, including some in the euro area, should reconsider the pace of near-term fiscal consolidation. Overdoing fiscal adjustment in the short term to counter cyclical revenue losses will further undercut activity, diminish popular support for adjustment, and undermine market confidence.
The IMF doesn’t name individual countries but it’s clear that it has the UK, along with the US and Germany, in mind. Britain’s interest rates, partly thanks to the Bank of England buying up hundreds of billions of gilts, are at historic lows, offering Osborne the chance to borrow to stimulate growth and jobs.
As long ago as October 2009, the NS warned that too great a pace of austerity would be self-defeating. Now, albeit far too late, the IMF agrees. Osborne’s deficit reduction programme has left Britain with slower growth than every EU country except Greece, Cyprus, Portugal, Slovenia and Denmark, and he is set to borrow billions more than Labour planned.
There is no prospect of Osborne changing course, the political cost would be too high, but it is becoming ever harder for him to argue that there is no alternative.