Outlook Some commentators are saying the IMF's advice to Mr Osborne this week did not amount to a call for the Chancellor to adopt an economic Plan B. I beg to differ. The IMF did not say the Government should merely permit the automatic stabilisers to function – which is what Mr Osborne means when he talks about his plan's flexibility. It did not say the Treasury should cut more to allow more infrastructure spending, enabling the overall deficit programme to continue at the same pace. What the IMF said is that the UK should not cut the structural deficit this financial year. At all.
But didn't the IMF also say that the Coalition's medium-term strategy remains appropriate? It was not so clear cut. Listen to the IMF deputy managing director David Lipton: "One has to evaluate the impact of policies on the economy as you go, so whether the present medium-term framework turns out to be an appropriate one when measured next year or the year after remains to be seen." Note "remains to be seen".
What we have here is a call for the UK to pause structural deficit cuts this year and a strong hint the Coalition should be prepared to ease up in future years as well, depending on the state of the economy. If that's not a Plan B, what is?
- More about:
- International Monetary Fund