The head of the IMF, Christine Lagarde, has suggested that projected UK growth figures are “not particularly good”. She declined to be drawn into a debate about whether or not the UK ought to review its austerity policy. However, the organisation’s chief economist, Oliver Blanchard, was not so reticent and has called on the UK to reconsider its austerity strategy in the light of the continuing weakness that the economy faces.
Whilst austerity measures are aimed at reducing the public deficit through making savings on public expenditure through cuts, they have a knock-on effect of damping down economic activity. This reduces the revenue side of the equation for governments and pushes up social security costs such as unemployment benefits.
Muted criticism has also come from the current chief of the Bank of Canada, Mark Carney. Mr Carney is set to take over as the next head of the Bank of England in July. In his opinion, the US recovery was leaving “crisis economies” such as Japan, the Eurozone and the UK behind. In an interview prior to a meeting between the World Bank and the IMF, Mr Carney noted: " can provide the conditions for growth... but they can't deliver the long-term growth. That needs to come from true fiscal adjustment and fundamental structural reforms."
The UK has missed its economic forecasts since 2010 when the austerity measures were implemented and borrowing remains stubbornly high. The IMF recently trimmed its forecast for growth in the UK economy this year from 1% to 0.7%.
It might be heresy, but the obvious solution is to make a cold, hard evaluation of spending which can be cut, chopping out non-essential expenditure whilst adopting policies to boost growth, thereby reducing social security costs through greater employment and boosting revenues from income taxes and consumer taxes.