Dandyman
In London village.
...is it time for a new General Election ?
http://www.guardian.co.uk/politics/2013/may/22/george-osborne-imf-cuts-headwinds
George Osborne was on Wednesday urged by the International Monetary Fund to rethink his plans for a £10bn tax-and-spending squeeze this year, as part of a broad based attack on the coalition's economic policies.
After a fortnight's fact-finding mission in London, the Washington-based lender warned that the planned package of spending cuts and tax rises would "pose headwinds" to growth, which could jeopardise the "tepid" economic recovery.
Asked whether that meant the government should slow the pace of deficit-reduction, David Lipton, the IMF's first deputy managing director, said it did.
He urged the government to bring forward spending plans: "Within the credible medium-term objectives it's useful for the economy for some infrastructure and other measures to be brought towards the present. That would reduce the drag in this year and in the coming years."
Ed Balls, the shadow chancellor, seized on the IMF's analysis, sayingresponded: "This is the call for action on jobs and growth that the IMF has been threatening to deliver for many months and a stark warning of the consequences if the chancellor refuses to listen."
As well as questioning the chancellor's fiscal plans, the IMF used its annual health-check of the UK economy, known as an Article IV report, to warn that the UK was still a long way from a strong and sustainable recovery.
The IMF called for the chancellor to set out a clear strategy on returning the bailed-out banks Royal Bank of Scotland and Lloyds to the private sector, and argued that a prolonged period of weak growth risked doing permanent damage to the economy.
Osborne's much vaunted reform of financial regulation also came in for criticism, with the IMF urging him to hand stronger powers to the new financial policy committee (FPC), which will be given the job of reining in asset booms.
The IMF would like to see the FPC given the right to limit loan-to-value and loan-to-income ratios on mortgages, to prevent a housing bubble inflating.
IMF experts also questioned the wisdom of the chancellor's controversial Help to Buy scheme for those trying to get on and up the housing ladder, which formed the centrepiece of March's budget. It said that without more houses being built it could just drive up prices.
"This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing."
Help to Buy has also been criticised by the Treasury select committee, and the Bank of England governor, Sir Mervyn King, who has warned that it strays too close to state support for the mortgage sector.
After facing pointed criticism from the IMF chief economist, Olivier Blanchard, who warned Osborne in Washington last month that he was "playing with fire", the chancellor had hoped that recent signs of life in the economy, including news that GDP expanded by 0.3% in the first quarter of 2013, would persuade the IMF to soften its verdict.
But despite acknowledging the "nascent signs of momentum" in the economy, the IMF said the long-term benefits of bringing forward spending on infrastructure would outweigh the costs of a short-term increase in borrowing.
Frances O'Grady, the TUC's general secretary, said: "The IMF prognosis on the UK economy is damning – this is the weakest economic recovery in recent history. Worse still, much of this pain is self-inflicted. Capital investment, the best way to lift countries out of recession, is now at its lowest level since the second world war."
In a prepared statement, the chancellor – who left the press conference before Lipton answered press questions – hinted that he would focus on infrastructure spending in his forthcoming spending review.
"I agree that it is right to prioritise infrastructure investment where we can … and that's why it will be a focus of the spending round next month."
However, John Cridland, director-general of the CBI, used a speech on Wednesday to argue that the government had failed to live up to its past promises on restoring the UK's crumbling transport and power networks.
"After two years of encouraging policy announcements, we're simply not seeing the expected flow of projects materialise. Despite some progress, too often businesses and investors, and indeed government, are caught in still caught in a frustrating cycle of waiting on each other," he said, in a speech to the Association for Consultancy and Engineering annual conference.
The IMF's renewed onslaught on the UK's policies came amid fresh evidence of the fragile state of the economy. Official figures showed that UK retail sales fell by a far-worse-than-expected 1.3% in April, as shoppers struggled to cope with rising food prices.
http://www.guardian.co.uk/politics/2013/may/22/george-osborne-imf-cuts-headwinds
George Osborne was on Wednesday urged by the International Monetary Fund to rethink his plans for a £10bn tax-and-spending squeeze this year, as part of a broad based attack on the coalition's economic policies.
After a fortnight's fact-finding mission in London, the Washington-based lender warned that the planned package of spending cuts and tax rises would "pose headwinds" to growth, which could jeopardise the "tepid" economic recovery.
Asked whether that meant the government should slow the pace of deficit-reduction, David Lipton, the IMF's first deputy managing director, said it did.
He urged the government to bring forward spending plans: "Within the credible medium-term objectives it's useful for the economy for some infrastructure and other measures to be brought towards the present. That would reduce the drag in this year and in the coming years."
Ed Balls, the shadow chancellor, seized on the IMF's analysis, sayingresponded: "This is the call for action on jobs and growth that the IMF has been threatening to deliver for many months and a stark warning of the consequences if the chancellor refuses to listen."
As well as questioning the chancellor's fiscal plans, the IMF used its annual health-check of the UK economy, known as an Article IV report, to warn that the UK was still a long way from a strong and sustainable recovery.
The IMF called for the chancellor to set out a clear strategy on returning the bailed-out banks Royal Bank of Scotland and Lloyds to the private sector, and argued that a prolonged period of weak growth risked doing permanent damage to the economy.
Osborne's much vaunted reform of financial regulation also came in for criticism, with the IMF urging him to hand stronger powers to the new financial policy committee (FPC), which will be given the job of reining in asset booms.
The IMF would like to see the FPC given the right to limit loan-to-value and loan-to-income ratios on mortgages, to prevent a housing bubble inflating.
IMF experts also questioned the wisdom of the chancellor's controversial Help to Buy scheme for those trying to get on and up the housing ladder, which formed the centrepiece of March's budget. It said that without more houses being built it could just drive up prices.
"This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing."
Help to Buy has also been criticised by the Treasury select committee, and the Bank of England governor, Sir Mervyn King, who has warned that it strays too close to state support for the mortgage sector.
After facing pointed criticism from the IMF chief economist, Olivier Blanchard, who warned Osborne in Washington last month that he was "playing with fire", the chancellor had hoped that recent signs of life in the economy, including news that GDP expanded by 0.3% in the first quarter of 2013, would persuade the IMF to soften its verdict.
But despite acknowledging the "nascent signs of momentum" in the economy, the IMF said the long-term benefits of bringing forward spending on infrastructure would outweigh the costs of a short-term increase in borrowing.
Frances O'Grady, the TUC's general secretary, said: "The IMF prognosis on the UK economy is damning – this is the weakest economic recovery in recent history. Worse still, much of this pain is self-inflicted. Capital investment, the best way to lift countries out of recession, is now at its lowest level since the second world war."
In a prepared statement, the chancellor – who left the press conference before Lipton answered press questions – hinted that he would focus on infrastructure spending in his forthcoming spending review.
"I agree that it is right to prioritise infrastructure investment where we can … and that's why it will be a focus of the spending round next month."
However, John Cridland, director-general of the CBI, used a speech on Wednesday to argue that the government had failed to live up to its past promises on restoring the UK's crumbling transport and power networks.
"After two years of encouraging policy announcements, we're simply not seeing the expected flow of projects materialise. Despite some progress, too often businesses and investors, and indeed government, are caught in still caught in a frustrating cycle of waiting on each other," he said, in a speech to the Association for Consultancy and Engineering annual conference.
The IMF's renewed onslaught on the UK's policies came amid fresh evidence of the fragile state of the economy. Official figures showed that UK retail sales fell by a far-worse-than-expected 1.3% in April, as shoppers struggled to cope with rising food prices.
