IMF confirms Osborne’s cuts put UK recovery in slow lane

By Liam Byrne MP

The IMF last night confirmed that George Osborne’s cuts have put the UK recovery in the slow lane – and warned that cuts would need to be rolled back if growth comes in lower than expected. The Independent Office of Budget Responsibility has warned that there is just a 40% chance of the UK hitting its new growth projections.

Here’s the three top-lines:

1. The recovery delivered by Labour is one of the best in Europe. Growth in 2010 for the UK beats France, Italy and Spain – and is largely based on strong growth in the first and second quarter of the year.

2. The IMF has revised up its forecasts for growth in 2011 across the Eurozone – but cut its forecast for the UK by 0.1%. Euro-area growth estimates on the other hand have been revised up 0.2%. The IMF’s chief economist Oliver Blanchard said:

“Unless advanced countries can count on stronger private demand, both domestic and foreign, they will find it difficult to achieve fiscal consolidation.”

In the UK, however, the government has hit private sector demand hard with the VAT hike and big threats to jobs from fast public spending cuts this year. Indeed, the IMF’s report concludes:

“In the United Kingdom, domestic demand is expected to remain relatively subdued, particularly following the recent measures to cut the budget deficit”.

3. A focus on getting people back to work is now the key says the IMF;

“To spur a stronger recovery and more employment growth, government policies need to become more proactive and coordinated”

In the UK, the government has cut back on back-to-work programmes like the Future Jobs Fund which has been praised by frontline JobCentre staff. George Osborne’s budget hits UK growth so hard that an extra 100,000 will be put on the dole – and the benefits bill will go up by nearly £1 billion. That means bigger cuts are needed elsewhere.