In an interview with the Financial Times, Nick Clegg has signaled that the coalition government will take on board the criticisms of the IMF and launch a “massive” push for growth, but has denied that the plan is a “Plan B”, “insisting,” the FT report, “the coalition’s deficit reduction plan had earned Britain market credibility.”
In the interview, Clegg said that the government’s “absolute priority” was to use the government’s position as the holder of extremely cheap funds to inject credit into the economy, “massively amplifying the principle of what we did on credit easing”. This chimes perfectly with the IMF’s advice to ease monetary policy, but there is less word from Clegg as to whether or not he will take up the recommendation to perform fiscally neutral “growth-friendly” policies of infrastructure spending.
The Deputy Prime Minister denies, however, that the plan is in response to the IMF, saying:
From the top of government, a few weeks ago we decided this was the route we’re going to take. That’s the instruction we’ve issued to the Treasury.
And rather than accepting the accusation that the UK’s switch from deficit reduction at all costs to a slower paced plan involving, in the Prime Minster’s words, “radical” monetary policy and some fiscal looseness represents a Plan B (which George Osborne famously said didn’t exist), Clegg instead seems to claiming that the prior tough talk was all an act. Apparently the coalition had no choice but to set out:
In very lurid terms the state of the emergency we were facing… That kind of language over a prolonged period of time can have a dampening effect on mood, which is very important in an economy.
Language or not, Plan B or not, something has definitely changed.