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IMF report says UK’s “Recovery has stalled”

July 19, 2012 3:16 pm

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The IMF have just released a scathing report on the state of the British economy. Here, for your perusal, are some of the stand-out quotes:

“Recovery has stalled. Post-crisis repair and rebalancing of the UK economy is likely to be more prolonged than initially envisaged. Confidence is weak and uncertainty is high.” – Page 1

“The planned pace of structural fiscal tightening will need to slow if the recovery fails to take off even after additional monetary stimulus and strong credit easing measures.” – Page 1

“The big picture on growth is one of stagnation since late-2010″ – Page 5

”If growth does not take off and unemployment fails to recede even after substantial further monetary stimulus and strong credit easing measures have been given time to work, the policy response should include a further slowing of fiscal consolidation.” – Page 39

“Scaling back fiscal tightening plans should be the main policy lever if growth does not build momentum by early-2013 even after further monetary stimulus and strong credit easing measures.” – Page 45

Too far. Too fast. Hurting but not working. Once they were Labour Party soundbites – now they’re being backed by the IMF.

http://britishseniorcitizensparty.freeiz.com/ Robin Macfarlane

exactly what we have been saying.Austerity wrong.Investment in infrastructure Assets that incorporate jobs for young people is the way 2 go.House building for low rent is badly needed ‘cos house prices have out-stripped incomes,due to lack of CCL House building for 60 years
- treborc
  
  Totally agree, it’s what we have been fighting for since Thatcher, sadly New Labour did not want to know, we have to build low cost homes and low cost rental housing.
  
  Otherwise known as council housing, swear word to labour these days.
  
  Otherwise what is the difference between all three political parties.
AnotherOldBoy

The IMF report is an interesting read. I draw attention to the following passages which suggest that Labour (and Mr Balls in particular) might want to be careful what they say:

”
Leading up to the financial crisis, economic growth in the UK was brisk, led by consumption and fueled by declining national saving and rising leverage. With the household share of national income falling sharply, households reduced their saving and borrowed more to sustain consumption growth and a housing bubble. Public finances entered the crisis with little policy space and deteriorated sharply when the crisis hit. Much of this deterioration in the fiscal position was structural, reflecting permanent revenue losses and a sharp drop in potential GDP growth during the crisis.
Sustainable recovery requires addressing the factors underpinning pre-crisis imbalances, notably leverage and debt, and a rebalancing of demand. In particular, there needs to be a handoff from public to private sector-led demand, notably greater investment and net exports.”

Sustainable recovery requires addressing the factors underpinning pre-crisis imbalances, notably leverage and debt, and a rebalancing of demand. In particular, there needs to be a handoff from public to private sector-led demand, notably greater investment and net exports.”
- Right On
  
  The BRIC countries will save us… soon we’ll be exporting as much to Brazil, Russia, India and China combined as we once did to that economic powerhouse the Republic of Ireland!
- PeterBarnard
  
  Also “leading up the financial crisis,” the IMF in its UK country report for 2006 was basically content with UK economic policy and forecast economic growth of 2.9% in 2007, 2.7% in 2008 and an average of 2.7% for 2009-12. As we know, things turned out somewhat different …
  
  The IMF is basically useless and are testament to J K Galbraith’s observation that “the main function of economic forecasting is to make astrology look respectable.”
aracataca

I am not against Council Housing per se but I am wary of repeating the mistakes of the past, ie the nightmare horror estates of the 1960s that eventually had to be blown up. Low cost housing can also often mean very poor quality. In addition, I am not happy about Labour Councils being landlords who,as was the case in the 1970s, do not carry out vital repairs or maintain the property properly. I have always considered the landlord-tenant relationship to be a Tory idea and I am not sure that it is a relationship that we should engender and/or encourage.
- Flook
  
  Less council housing means more Housing Benefit going into the pockets of private landlords. Without cheaper rents Housing Benefit will continue to balloon forever.
  - aracataca
    
    What about flogging the new houses at a reduced rate to the Residents’ Association (ie each tenant contributes to the purchase cost) and the houses are then run as a co-operative through the
    Residents’ Association whose officers and managers etc are elected? This would require the opening up of lending policy by the banks and the government. When the tenant moves he/she sells his share back to the co-operative (
    Residents’ Association).
    Co-operative housing schemes were initiated and developed in the 1970s in what were then known as ‘Hard to let’ blocks (mainly in London) but Corporatist Labour councils frowned upon them and sought to centralise control over them. Often they took them back into Local Authority ownership and management.
    - Flook
      
      Eh? Build social housing a full cost funded out of taxation or borrowing and then flog this brand new housing to a Resident’s Associations at a reduced rate and let them run via some kind of disassociated cod-democracy? Who gets to decide who can be a member of such an association? And why should such a group be given a preferential chance to occupy new housing the build of which has been subsidised ? Who would allocate the tenancies? At least with Councils this is done rationally and transparently. And how would monies invested by residents in their properties be recovered by them at such time when they move on? If house prices recover and such a dwelling ends up worth more when a resident leaves than when he/she moved in would he/she just get the lump-sum of cash they invested initially, pound for pound, devalued by inflation, or a percentage of the house’s current value based on the size of their original investment which could be significantly more? Or very much less if house prices fell would they get a smaller return or even end up facing negative equity just like home owners with mortgages go. And what happens to money invested in such houses by tenants – or time-limited part-owners or whatever – who die while in residence? Will it go to their nearest and dearest? Will family members have to quit the property in the event of the death of the nominated tenant? Oh, boy, I could go on all day about things like this until the cows come home.
      
      But here’s the kicker. Most Council tenants are poor and receive Housing Benefit from their local authority because their earnings are too low to meet even their council rent without help. These people and the millions like them on Council waiting lists have no money to contribute to schemes such as the one you mentioned or anything like them. They are powerless to help themselves. It is shameful that every governments from Thatcher onwards has deliberately ignored their plight while whining piteously about the bill for Housing Benefit exploding.
      
      Grant Shapps believes that he can fund social house building programmes using private money by allowing the rents on such dwelling to be normalised to within 80% of the market rent for similar properties. He predicts a build of hundreds of thousands of homes to be funded in this manner. He is wrong. It won’t happen. Even if it did it will not help the poor many of whom cannot get Housing Benefit to enable them to rent a home outside the 30th percentile for their area which may put new Council and Social Housing out of their reach by making it unaffordable to them! The very people such housing is supposed to help and harbour!
      
      The Tories claimed that Housing Benefit caps would make rents fall. This has proven not to be the case. The majority of private rents ARE increasing and lets to poorer people by private landlords diminishing. Private money and landlords will NOT solve the mess that we are in. Rents rise and so will the housing benefit necessary to be paid to the legions of the poor who earn too low a wage to enable them to pay their way unassisted.
      
      My prediction for the foreseeable future is ever increasing private rents, ever increasing homelessness, next to no social housing constructed anywhere, poor people being driven from more affluent areas where they can work in low paid service sector jobs to poor areas where they will end up permanently unemployed because of housing benefit cuts, less mobility of labour, more division, more poverty, ill health and eventually crime.
      
      Thanks David and thanks Nick.
      
      Victorian values, eh?
      - Alan Giles
        
        I have to say that Housing Asscns are not always beneficial to tenants.
        
        My voluntary work brings me into contact with people who have problems with, amongst other things, housing.
        
        Just one example: About six years ago a lot of local councils were forced to either set up ALMOs (Arms Length Management Organisations) to manage their housing stock, or put them out to Housing Asscns, the decision being made by the residents voting . This was because the only way the local authorities could get access to the decent housing programme money was to go down these routes (one of Prescott’s great ideas BTW)
        
        I know of one situation where the majority of one LA residents decided they wanted the ALMO option, but one particular, autonomous estate opted for a H.A., and this was granted.
        
        I was involved with two long term and elderly tenants who had, with the councils blessing, kept small dogs in gtheir homes but the H.A who took over the management told these ladies they had to get rid of their pets as their own set of rules did not allow tenants to keep pets.
        
        Some of these H.A. can be just as – if not more so – pettyfogging and authoritarian than local authorities, with just as many self-important jobsworths.
        
        Anything I say contrary to what William (aracataca) says he always regards as an affront, but I would ask him to consider that with jobs becoming ever more insecure house prices rocketting etc, it will become ever more difficult for younger people to buy houses or flats (sorry they call them “apartments” these days.
        
        The council house/flat seems the only sensible solution to this problem, and we should forget this ridiculous snobbery about being a council tenant which was fostered by Mrs Thatcher.
        
        We should also remember buying a house seems to be n especially British obsession – renting is the norm in many parts of Europe
      - aracataca
        
        Very upbeat Flook. I am proposing co-operative social housing as opposed to council owned and managed social housing. IMHO almost all these problems that you have referred to are replicated if the council owns the property.
        Co-operative housing of the type I have referred to was moderately successful in parts of London in the 1970s but lost out in the end on the one hand to developers (under Thatcher), so I would make it impermissable to sell to developers and on the other hand to corporatist Labour and Tory councils who viewed co-operative housing as a threat to their control.
        In general terms however one of the ways out of the present economic (and social crisis) is to build lots of houses. This was done in the 1930s and of course during the 1950s and 1960s and in both periods it was successful. At one level it is an archetypal Keynesian solution to the current depression (NB: not recession) which is imminent. The western world is about to be Japanised with 20+ years of 0% growth.
- treborc
  
  You love to spout the labour party line, horror housing estates.
http://twitter.com/all_thats_left_ All Thats Left

The government’s economic policy is becoming increasingly baffling – if they were a football team, the crown would now have risen as one to change – ‘you don’t know what you’re doing.’
Is it austerity or is it Keynesian growth? Even more worrying – do they actually know the difference?
We analyse the government’s economic confusion in the following article: http://www.allthatsleft.co.uk/2012/07/austerity-forever/
http://twitter.com/all_thats_left_ All Thats Left

The government’s economic policy is becoming increasingly baffling – if they were a football team, the crown would now have risen as one to change – ‘you don’t know what you’re doing.’
Is it austerity or is it Keynesian growth? Even more worrying – do they actually know the difference?
We analyse the government’s economic confusion in the following article: http://www.allthatsleft.co.uk/2012/07/austerity-forever/

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