Thursday

19th Oct 2017

Delay austerity and increase investment, IMF warns UK

  • Lagarde: go for growth not further cuts, the IMF has warned (Photo: World Economic Forum)

The UK should delay plans to push through further austerity measures worth £10 billion (€12 billion), the International Monetary Fund (IMF) warned on Wednesday.

Speaking on Wednesday (22 May) following the completion of a two week mission in London, IMF deputy director David Lipton called on the Conservative-led government to delay new tax rises and spending cuts

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The extra cuts would "pose headwinds to growth…..at a time when resources in the economy are under-utilised," said the Washington-based institution.

Instead, the IMF urged London to bring forward plans to invest in infrastructure projects and to offer incentives for private investment by reducing corporate tax rates.

The government "could undertake a reform of property taxes and consider broadening the VAT base" to pay for the measures.

It also urged the government to prepare the sale of taxpayer owed stakes in the RBS and Lloyds' bank.

"It's useful for the economy for some infrastructure and other measures to be brought towards the present. That would reduce the drag in this year and in the coming years," added Lipton.

Although Britain narrowly avoided a triple dip recession by recording economic growth of 0.3 percent in the first quarter of 2013, output is still below its pre-crash level in 2007.

Income per person is still 6 percent below 2007 levels. It is also attempting to reduce one of the largest budget deficits in the EU, while the country's debt pile has nearly doubled since 2008 and is expected to reach 99 percent of GDP in 2014.

The IMF estimates that the UK economy will expand by 0.7 percent in 2013 if the government sticks to its £10 billion of tax and spending measures, a figure which it believes would rise to 1.3 percent if the cuts were pushed back for a year.

The IMF's announcement is the latest sign that economic experts believe that the pace of deficit reduction should be slowed to allow stronger economic growth. The European Commission has also indicated that a number of countries, including France and Spain, should be given extra time to balance their budgets.

IMF warns Europe of falling behind US on recovery

Europe is falling behind the US in emerging from the economic crisis, with sluggish growth in Germany and recession in France worsening the outlook for eurozone periphery countries, the IMF has said.

Analysis

Juncker's euro-push could risk unity, warns eastern flank

The EU Commission chief hopes that as Emmanuel Macron pushes for euro area countries to integrate further creating a multi-speed Europe, central European members will be more inclined to join the single currency. Are they?

News in Brief

  1. EU summit moved to previous building after fumes scare
  2. Catalonia will 'not back down'
  3. New toxic incident in EU building ahead of summit
  4. Murdered Malta journalist's family invited to Parliament
  5. EU food safety chief denies keeping studies 'secret'
  6. EU states pledge 24,000 resettlement places so far
  7. US ready for arms sale to update Greece's F-16 fleet
  8. Austria's Green leaders step down following election failure

Stakeholders' Highlights

  1. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  2. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  3. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  4. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  5. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  6. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  7. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe
  8. CECEE-Privacy Regulation – Hands off M2M Communication!
  9. ILGA-EuropeHealth4LGBTI: Reducing Health Inequalities Experienced by LGBTI People
  10. EU2017EEEHealth: A Tool for More Equal Health
  11. Mission of China to the EUChina-EU Tourism a Key Driver for Job Creation and Enhanced Competitiveness
  12. CECENon-Harmonised Homologation of Mobile Machinery Costs € 90 Million per Year

Latest News

  1. EU okays Privacy Shield's first year
  2. EU seeks to decrypt messages in new anti-terror plan
  3. EU agencies defend research ahead of glyphosate vote
  4. Spain points at elections as exit to Catalan crisis
  5. How EU can ensure Daphne Caruana Galizia's legacy survives
  6. Juncker dinner to warm up relations with eastern EU
  7. Court hearing in MEPs 'private' expenses battle
  8. The unbearable lightness of leadership