The IMF warned George Osborne on Wednesday that in favor of national interest and in order to not jeopardize the recovery of the economy, he should not opt for the £10bn tax-and-spending squeeze this year.
The IMF mentioned that the administration should reduce the speed at which they are trying to reduce the deficit. The IMF is insisting that the government should make proper plans for the spending of the current year and the future years so that the deficit reduction can be properly planned.
The IMF also questioned the fiscal year plan by Chancellor Osborne, and used the latest national economic report as an example to point out that the UK is still far away from a safe recovery. The IMF has insisted that the government makes a clear plan on how the Royal Bank of Scotland and Lloyds Bank would be returned to the private section after being bailed out. They insisted that the longer the growth period stays weak, the more chances that it would do a long term damage to the country’s economy.
The financial regulatory reform, which Chancellor Osborne was pressing on continuously, was also criticized by the IMF which insisted that the newly created financial policy committee should have the power to guide the asset increase and valuation. The IMF insisted that the FPC should have the power to control the loan-to-value and loan-to-income ratios so that an eventual real estate inflating bubble could be avoided.
The IMF also criticized the Help to buy scheme which the Chancellor puts forward in the March budget. As per the IMF, it might temporarily be of help to the real estate market, but if more houses are not being built than it would just end up raising the prices of the real estate.
The scheme was also under criticism from the Treasury Committee and Sir Mervyn King who is the governor of the Bank of England.
The IMF mentioned that the advantages of setting up and investing in infrastructure would be a lot more beneficial in the longer term than compared to having more short term borrowing.
The chancellor did mention in one of his statements that infrastructure investment is much needed and that he will be focusing on those in his plans.
General Secretary of TUC, Frances O’Grady mentioned that this was the worst recovery for the economy, and there is still a very long way to go.
John Cridland who is the director general of CBI criticized the government in his speech on Wednesday and stated that the administration has not lived up to the expectations and promises on recovering UK’s transport and power system. He mentioned that the project are just not getting materialized keeping the businesses and investor frustrated and waiting for each other.
The criticism from the IMF has started again after recent statistics showing evidence of the further downfall in the economy of the country. As per statistics the retail sales have gone down more than expected, and the public is having a hard time to keep up with the increase in food prices
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