Cut taxes to boost economy, IMF tells George Osborne

Big Don

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Cut taxes to boost economy, IMF tells George Osborne

George Osborne should reduce taxes rather than relax his austerity spending cuts if Britain’s economy continues to struggle, the International Monetary Fund has said.


By James Kirkup, Political Correspondent
10:00PM BST 06 Jun 2011


Telegraph.co.uk EXCERPT:


The IMF yesterday gave broad support for the Chancellor's plans to reduce the government deficit by cutting public spending and insisted that there was no need to change course at the moment.

The global economic watchdog said the economy remained on track for a “moderate” recovery where interest rates remain low and inflation finally starts to ease next year.

But after its experts visited Britain for their annual survey, the IMF also warned of “significant” risks that growth will remain feeble and unemployment “unacceptably high”.

Some economists have said that, if the economy does stall, Mr Osborne should be prepared to relax his programme of cuts to borrow more and spend more.

By contrast, the IMF said that in such a scenario, the economy should be stimulated with a combination of more “quantitative easing” from the Bank of England and “temporary tax cuts” for businesses and low-income households.

Tax cuts would be “faster to implement and more credibly temporary” than any move to increase public spending, it said. Its economists even hinted that if the recovery did not materialise, larger cuts to welfare and other programmes might be needed to balance the budget and reassure financial markets.
The Chancellor has said that Britain’s structural deficit will be paid off by the end of 2014-15, cutting Whitehall departments’ budgets by almost £100  billion over four years.
That plan has come under pressure from gloomy economic indicators. Official figures show that economic growth was effectively zero in the six months to April.
The IMF said it was not time to adjust macroeconomic policies because the weak growth figures were largely temporary. That verdict was a political boost for Mr Osborne, but the fund also warned that his spending cuts will create “headwinds for short-term growth” that will have to be offset by the Bank of England keeping interest rates low.
 

Tez3

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Not sure the IMF has any credibility, for all the 'power' they have. Wonder who the new president of the IMF will be? Another French person by all accounts and we know how they just love the British lol!
 

crushing

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Not sure the IMF has any credibility, for all the 'power' they have. Wonder who the new president of the IMF will be? Another French person by all accounts and we know how they just love the British lol!

Looks to be Christine Lagarde. Hey, her father was a professor of English. ;)
 

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