IMF chief issues warning to Osborne over cuts
IMF Managing Director Christine Lagarde doesn’t mention the UK in her Financial Times article (£) on reducing government deficits today, but there are some fairly blatant messages about not cutting too hard and too fast, emphasising growth over cuts, and raising taxes. Yesterday I suggested that if Ed Balls had crossed his fingers and held his nose, he could have signed up to George Osborne’s FT column. He could have written Lagarde’s.
First the disclaimer. I suspect the TUC would not agree with Christine Lagarde’s precise plans for the UK economy. We would probably want fewer cuts, and a higher ration of taxes to cuts (and although we might agree on the emphasis on growth I suspect she’d want more liberalisation, too). The devil would undoubtedly be in the detail.
But as a challenge to the broad thrust of the Coalition Government’s strategy, these quotes are unbeatable:
“Slamming on the breaks too quickly will hurt the recovery and worsen job prospects.”
“While they [the markets] dislike high public debt – and may applaud sharp fiscal consolidation – as we saw last week, they dislike low or negative growth even more.”
And finally, a sideswipe at that VAT increase:
“Revenue also must increase, and the first choice must be measures that have the lowest effect on demand.”
As the BBC’s Robert Peston has noted, the key challenge to Osborne-omics in Lagarde’s article is that she is calling for short-term action to stimulate growth and medium term action to reduce deficits. Or growth first, cuts and tax increases later.