The IMF’s downgrades confirm Labour’s attacks on the coalition’s budget. Not only are the cuts going to hurt those on the lowest incomes the hardest but the scale of the cuts will prolong the economic recovery. The IMF have had to go back to the drawing board with UK growth forecasts, knocking a huge 0.4 per cent off growth next year – more than for any other G7 economy. Growth next year is now forecast to be 2.1 per cent in 2011 meaning unemployment will continue to rise, businesses will continue to struggle and families on modest and middle incomes will continue to struggle making ends meet.
This is a dire situation and a devastating judgement on the lack of a strategy for growth from the government – scrapping RDAs, abolishing the future jobs fund and abandoning support for the new manufacturing industries of the future have one outcome only: slower growth. That is the verdict of the IMF and it is a damning one.
Rachel Reeves, MP for Leeds West
The IMF is not alone in revising growth forecasts down in the UK following George Osborne’s austerity budget; his own Office of Budget Responsibility did the same. However, neither are currently predicting a double dip recession. The real worry will come if consumers get so freaked out by the cuts to come that they once more decide to stop spending, particularly if problems elsewhere also cause demand for our exports to fall back. If that happens, with a government committed to shrinking the state, it’s hard to see where any growth could come from.
Kitty Ussher, chief economist, Demos
The IMF’s predictions set out the consequences of the economic about-turn of European governments. By overtightening fiscal policy, the coalition has damaged confidence and the IMF growth predictions show the ripple effect on our fragile economic recovery. So some economists predict a resumption of quantitative easing. Yet monetary policy has been a more reliable tool for controlling inflation than for reflating an economy that is flatlining. QE along with leaking schools, rising unemployment and pensioner poverty is too high a price to pay for George Osborne’s policies.
We need to show that managing the economy is about more than controlling inflation and cutting deficits. It’s about building confidence – as well as schools – encouraging people to spend and invest, and creating jobs. For that we need a government which can see beyond the boundaries of the City.
Sally Keeble, former MP for Northampton North and treasury select committee
The IMF’s forecasts show that the coalition’s budget could take us to a double-dip recession. The IMF is joining with the US, India and most leading economists in concluding that the coalition’s mad dash to slashing public spending by up to 40 per cent and raising taxes will disproportionately hurt the poorest, and will not reduce Britain’s debt levels. The coalition’s refusal to listen to these voices of reason will lead to a large rise in unemployment, social unrest and declining tax receipts. Make no mistake – this unnecessary austerity could cripple us for a generation.
Ben Fox, chairman of GMB Brussels
Almost all economic forecasts are bunk. That is, if you are looking for precise forecasts of the future. The fact that the IMF has revised down its UK growth projections by less than half a percent is not that important – it could just as well revise them up again in the autumn. It is just not possible to accurately forecast the future on a consistent basis. That applies to figures from the Office for Budget Responsibility too: we have seen there that changing underlying assumptions can make a big difference. The Bank of England, with all its intelligence, keeps getting its inflation forecasts wrong and missing its target. Uncertainty also applies to the actual GDP data we get from the Office of National Statistics: it can take years of revisions before we really know what happened.
What we should look for is general evidence of how the economy is trending. It looks as if the second quarter saw some strength but that now there is more uncertainty in business, while the supply of credit remains constrained. Moreover, there are real risks into next year if confidence in the future does not improve and governments such as ours aggressively cut spending. At the moment, the cult of austerity reigns. This government is risking hundreds of thousands of jobs on this political and economic philosophy.
Stephen Beer is an investment manager at the Central Finance Board of the Methodist Church. This represents his personal opinion.
When you go to war and your own artillery starts firing at you, you know you made a severe mistake in judgement, leadership or possibly both.
Unfortunately for our boy George, the incoming fire this time originates from the IMF, the somewhat infamous rightwing vehicle of choice typically chosen by neo-liberals such as Mr Osborne to exact policies. By responding negatively to the £155 billion cut to public spending in the budget of doom and cutting their growth forecasts for the UK – 2.5 per cent down to 2.1 per cent in 2011, more than any other developed economy – the IMF have dealt a somewhat deep blow to the Treasury’s credentials as the guardians of recovery. Couple this with the first backbench uprising in the coalition, it becomes clear that Mr Osborne’s drastic policy failures are not only in material (of which we have significant historic evidence in the 1930s and 1970s) but rather more crucially actually in PR, or putting it even more simply, a public relations war on confidence. If the economy is to continue growing as has been the case recently in areas such as manufacturing, (recently hitting a 15 year high) it needs support and sensible policies which will attract international institutions to look at Britain as a beacon of growth. Unfortunately the coalition Government seem to ignore this at their peril.
Roland Marcelin-Horne, media officer, Holborn & St Pancras CLP