Ed Balls MP, Labour’s Shadow Chancellor, in response to George Osborne’s interview on the Today programme and the IMF’s Article IV statement published at a Treasury press conference today, said:
“Nobody will be surprised that the IMF has decided to re-affirm its backing for the Government’s policies at this very sensitive time. But the Chancellor should not take too much comfort from the report he launched at a Treasury press conference.
“The IMF has warned that there are significant risks to inflation, growth and unemployment. And they have downgraded their forecast for economic growth this year to just 1.5 per cent – compared to the 2.5 per cent it was predicting before the new government came to power.
“In these circumstances the cautious approach for George Osborne to take, and for the IMF to recommend, would be the one advocated by the deputy secretary-general of the OECD, who said only last month the pace of the cuts should be reconsidered if things turn out to be weaker than expected.
“It says it all about George Osborne that he hails an IMF forecast that implies rising unemployment and predicts slower growth. His complacency about the state of the economy is concerning. Of the over 415,000 jobs George Osborne boasts have been created in the last year, only 15 per cent of them have been since his spending review. Instead of attacking the media for reporting what’s happening in the real world, he should be asking himself why the economy has flatlined since his spending review and VAT rise.
“But he was right about one thing – the assumption that there’s a binary choice between not cutting at all and this government’s plan is indeed a false one. Of course there need to be cuts and tax rises to get the deficit down, but by going too far and too fast George Osborne risks getting us into a vicious circle. The slower growth, higher inflation and higher unemployment now being forecast mean the government is now set to borrow £46 billion more than they had planned.
“However much George Osborne and the IMF hope this is just a temporary blip, the cautious thing to do is not to wait and see and hope for the best, but get a plan B now. We need a balanced deficit plan that puts jobs and growth first, not a rash and extreme plan that increasingly looks like it isn’t working.”