George Osborne should reduce taxes rather than relax his austerity spending cuts if Britain’s economy continues to struggle, the International Monetary Fund has said.
George Osborne has said that Britain's structural deficit will be paid off by the end of 2014-15 Photo: GETTY
James Kirkup
Telegraph [UK]
06 Jun 2011
The IMF yesterday gave broad support for the Chancellor’s plans to reduce the government deficit by cutting public spending and insisted that there was no need to change course at the moment.
The global economic watchdog said the economy remained on track for a “moderate” recovery where interest rates remain low and inflation finally starts to ease next year.
But after its experts visited Britain for their annual survey, the IMF also warned of “significant” risks that growth will remain feeble and unemployment “unacceptably high”.
Some economists have said that, if the economy does stall, Mr Osborne should be prepared to relax his programme of cuts to borrow more and spend more.
By contrast, the IMF said that in such a scenario, the economy should be stimulated with a combination of more “quantitative easing” from the Bank of England and “temporary tax cuts” for businesses and low-income households.
Tax cuts would be “faster to implement and more credibly temporary” than any move to increase public spending, it said. Its economists even hinted that if the recovery did not materialise, larger cuts to welfare and other programmes might be needed to balance the budget and reassure financial markets.
The article continues at the Telegraph.
