James Moore: The IMF is backing a plan B for Britain
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Thursday 23 May 2013
Outlook Talking of the IMF, its main reason for being in town yesterday was to give its view on the current state of the UK's economy.
And as with any of its statements there was a little something for everyone in there. But if you'd listened to yesterday's press conference you could hardly come away from it with any other conclusion than that the IMF is quietly endorsing those who argue that plan A (austerity and deficit reduction) is actually damaging the UK economy.
The IMF, it's fair to say, is hardly calling for a spending binge. But despite the Treasury hosting its press conference, it is saying the man in charge of that department ought to at least be thinking about a plan B. Or maybe a plan A-plus.
In its view that means instead of deficit reduction this year, the £10bn or so slated to be saved should instead be deployed to fund capital projects, infrastructure spending and the like.
This chimes with what Centre for Economics & Business Research said recently, when it argued that the UK's GDP would be 5 per cent higher if its shabby infrastructure were brought up to the level enjoyed by some of our competitors. And it calculated a boost to GDP of £1.3bn for each £1bn spent on achieving that goal.
If its numbers are correct that £10bn would provide a £13bn boost to the UK's GDP (and lift economic activity by £28.4bn).
It would also create a lot of jobs. If that isn't enough to tweak the Chancellor's interest it would provide the additional benefit of being politically expedient, and popular.
While a large number of his colleagues appear to think otherwise, it is the economy that is the number one concern among voters. Europe comes way down the list. Following the IMF's prescription might have the benefit of demonstrating that someone in Government is aware of that fact.
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