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IMF unimpressed by Osborne's austerity measures

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Get your finger out and start creating some jobs. That was the gist of the IMF's message to Chancellor George Osborne, delivering the clear verdict that the coalition's policy of austerity and more austerity was slowing Britain's economic recovery.

The message had been sent very bluntly in Washington in April. The IMF reiterated it in more diplomatic language on this occasion, but made it clear that it recommended investment and job creation rather than the government's single-minded obsession with deficit reduction.

At a Treasury press conference, the IMF deputy managing director David Lipton, expressed concern at the £10bn Osborne is making in cuts. The IMF recommends that the money should be spent on infrastructure and tax incentives for business.

Lipton highlighted the dangers of excessive unemployment, made worse by the coalition's aggressive cuts to capital spending. With recession still affecting Europe and the banking system still fragile, the UK needs to get its economy growing more quickly if it is not to be vulnerable to a further slump.

The IMF backed up its theory with some persuasive reasoning. It argued that the time is right for extra spending that, with interest rates for government debt at an all time low, would be very cheap. The IMF predicts that UK growth for 2013 would be a pitiful 0.7 percent under present conditions, but that would increase to 1.2 or 1.3 percent if Osborne relaxed the purse-strings.

The IMF's comments are further embarrassment to Osborne, in effect supporting what Shadow Chancellor Ed Balls has been telling him across the despatch box for months. Osborne's refusal to countenance any compromise is beginning to look perverse. What is even more surprising is that the Liberal Democrat coalition partners are just as adamant in refusing to listen to the IMF's voice of reason. It seems clear that Osborne's stubborn stance is down to ideology rather than logic.

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