IMF head backs UK austerity measures

The Government's austerity package remains "the right thing to
do", the head of the International Monetary Fund said today in a boost
for Chancellor George Osborne.

Christine Lagarde gave her firm backing to maintaining the deficit-cutting measures, despite the threat of recession and economic forecasts being revise downwards.

Figures released on Wednesday showed the economy shrank by 0.2% in the final quarter of last year - slightly more than anticipated and fuelling Labour calls for a change of course.

The IMF has dropped its forecasts for UK growth to just 0.6% for this year, down from 1.6%, and 2% in 2013, down from 2.4%.

Remarks by its chief economist Olivier Blanchard that the UK might have to consider slowing the speed of cuts if growth proved to be "dismal" were seized on by shadow chancellor Ed Balls as backing for Labour's demands for a change of direction, including a tax cut stimulus.

But asked if she thought that was something the IMF would be happy to see, Ms Lagarde told BBC Radio 4's The World at One: "Our sense is that under the present circumstances the policy that is in place is the right one, and we have said that very explicitly.

"Under the current circumstances, the policy in place that consists of letting the automatic stabilisers move without readjusting and tightening the principles is the right thing to do."

The IMF was "very consistent" about that backing, she said, backing Mr Blanchard's analysis.

"If you ask a top-class academic 'what if?' then of course he has to envisage. But as it stands, under the circumstances and with the automatic stabilisers playing out as they do, this is fine."

Pointing to the 2013 forecast, she added: "Under current circumstances and with the policies that have been designed as they have been, we see a progression of growth.

"That's what's intended and that's what's good."

PA