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Which party does the IMF back on deficit reduction?

David Cameron and Ed Miliband clashed in the commons today, each claiming IMF declarations as support for their stance on deficit reduction. Who is right? Polly Curtis, with your help, finds out. Get in touch below the line, email your views to or tweet @pollycurtis

Yesterday’s IMF report, which downgraded growth predictions for the UK, also suggested that some country’s in the euro area should reconsider the pace of their austerity programmes, warning that they carry a “risk”. It said:

Too rapid consolidation during 2012 could exacerbate downside risks… Among those countries, those with very low interest rates or other factors that create adequate fiscal space, including some in the euro area, should reconsider the pace of near-term fiscal consolidation.

The comments led to furious speculation about whether this was directed at the UK or not with Ed Miliband claiming during prime minister’s questions in the Commons today that it was directed at the UK government. Cameron denied this, counter claiming instead that the IMF was supporting their “plan A”.

My colleague Andy Sparrow recorded Cameron’s claim here:

Cameron says the economy grew last year. There are more people in work now than at the time of the last election. Yesterday, at 5pm, Ed Balls said the government should listen to the IMF. At 7pm the IMF said “fiscal consolidation” in the UK was part of the solution.

Both parties are insisting that separate statements made by different people in the IMF back their case. Who is right?


The IMF report itself does not name the UK as one of those countries that might reconsider their austerity plans. Labour are pointing towards this BBC interview with the IMF’s chief economist Olivier Blanchard. The interview was yesterday, ahead of today’s abysmal growth figures. He said that if the figures were bad the government could consider slowing down the deficit reduction plan – but acknowledged that it would be difficult to change course now the government has made such a point of sticking to it. This is the transcript of the interview:

Blanchard: If the economy is doing worse, let the automatic stabilisers work for example, which is the case in the UK, which is partly the case in Germany as well. You can even go further than that, if growth is really dismal then you may decide that you’re going to go a bit more slowly about the discretionary part of the budget and for the UK there’s some indication that this happened with respect to the revision in potential output, yes to the extent that these countries are not under the gun from the markets, have plausible medium term plans, they can slow down and it would help.
BBC: So we don’t need to cut as deep as we were?
Blanchard: You have some room to do something if needed, yes if growth were to be even worse than we have forecast.
BBC: So more flexibility than we thought?
Blanchard: Yes you have, again, there’s another issue which is if you have announced the plan and you deviate from the plan you may lose credibility. So given that the UK has announced the plan moving from it is a bit more difficult than it might be for another country.

Number 10 political staff have just sent me an excerpt from the transcript of an interview that Jorg Decressin, a senior adviser to the IMF, did with Sky News yesterday evening. The transcript says:

Jorg Decressin: …We don’t think that the fiscal consolidation really adds to the problem. The fiscal consolidation is part of resolving problems facing the UK economy. You need a firm medium-term fiscal plan, and that is what the UK has in place….
Sky: There is no need for George Osborne to switch to a plan B?
Decressin: That’s correct.

In the aftermath of the PMQs debate, these were the two key items of evidence that that the two parties were circulating as evidence for their leaders’ claims.

Then, at about 1.30pm this afternoon, Richard Holden who works in the Conservative party press office tweeted:

@edballsmp #IMF. Rediker: “I think that it would be wrong at this point to say that they [#UK] should deviate from where they are” #WatO

He was referring to an interview Douglas Rediker who was on the IMF’s board up until two days ago and was involved in approving yesterday’s report, had given to the BBC’s World at One. Rediker was asked about the poor growth figures today, and said that the growth figures were in part a result of the government’s austerity plans but insisted it wasn’t the IMF’s role to dictate what the UK should do now:

You’ve got a government that has actually embraced a certain package and I think this was if not anticipated in terms of the actual numbers this is the logical consequences of the programme that has been embraced. That doesn’t mean it’s right or wrong it just means if you are going to go down a path where you’re trying to squeeze things here or pinch things there the natural outcome is that you are going to see an effect on GDP whether that turns into negative growth or simply lowers the growth rate that otherwise would have been. Clearly a decrease in the growth rate is a logical consequence of the package that has been embraced by the government.

Asked about yesterday’s report and whether it meant the UK should have a “plan B”, he said:

I wouldn’t go down that route. I think that the UK is doing what it believes is best. I don’t think that the IMF singled out of the UK as being the cause of any great global or regional phenomenon affecting the global economy or the regional economy. I think that every country should always have a plan a plan b and a plan c but that’s not specific to the UK. I think it would be wrong to at this point say it’s time to deviate from where they are I don’t think the IMF or I personally as an ex-IMF board member would want to opine on whether or not the UK should change its tack I don’t think it’s the intention of the report at all.

This is part of a broader report and I think that built into that report there are certain things different countries can take from it or not that doesn’t mean it’s an a la cart menu. But it foes mean that there are certain prescriptions that the IMF, research department and those that are the authors of report have put out there. But I don’t think anyone should look at it as if it’s a template that if you deviate from you are somehow causing your country or your region or the world some sort of pain. There’s clearly a broader sort of intellectual debate on going as to what the right responses are for any given country or any given region.


Olivier Blanchard, the IMF’s chief economist, is the most senior person to speak out on the issue of whether the IMF report was urging the UK to slow down its austerity programme. He said that the UK could, if the growth figures were poor (which they are), slow down the speed of the austerity plans to allow more space for economic growth. “It would help,” he said. However, he also acknowledged that the government could have a “credibility” problem if it u-turned on its biggest commitment: to cut the deficit. Jorg Decressin, a senior adviser to the IMF, said that there is no need for the UK to switch to plan B, however we have only seen a small part of his interview. Sky are sending me a full transcript and I’ll update this blog when I get it if it’s significant. Rediker’s comments are telling and don’t fit neatly into supporting either party’s claims. He said that reduced growth was a “logical consequence” of the austerity plans, but that it’s not the IMF’s role to dictate the UK’s economic policy. He describes there being a “broader sort of intellectual debate on going as to what the right responses are for any given country or any given region”. I think that means that the views about how to shore up the economy while tackling the deficit are as diverse within the IMF as there are in the house of Commons. Neither party can claim the IMF is firmly on their side. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds