The “anti-growth coalition”, as it was named by Liz Truss during her brief premiership, just keeps on growing. The latest to sign up is the International Monetary Fund (IMF), which has this week warned Rishi Sunak off cutting taxes and suggests instead a boost to public spending. It is a timely intervention. For the past few months, the right of the increasingly rightwing Tory party, including Ms Truss, has clamoured for lower taxes – supposedly in the name of economic growth, but more likely in the desperate hope of electoral survival. Mr Sunak has made it clear that he will indulge them, promising “more to come” on tax cuts. January began with a slice taken off national insurance contributions, and the debate around the March budget is not whether taxes will be cut but which ones are for the chop. Now along comes the IMF to wag an admonishing finger – and every British prime minister from Jim Callaghan onwards knows you don’t want one of those.
Just because the IMF says something, it ain’t necessarily so. In 2011 John Lipsky, then its acting managing director, flew to London to support George Osborne’s austerity plans. Two years later, its boss, Christine Lagarde, pulled a swift U-turn, and warned that spending cuts were tanking the economy. The very next year, in 2014, she U-turned again, claiming the UK was doing well. The reality is that ever since Britain’s bubble economy went pop in 2008’s crash, growth has been utterly anaemic. The financial crisis that the IMF did not spot produced a badly ailing economy, which the IMF signed off as being in good health. This in turn bred a crisis of cynical, extractive politics, at which IMF officials are doubtless appalled.
The IMF is staffed by economists; it crunches data and makes economic forecasts. But it is ultimately a political institution, and the conflict between what its sparkiest economists say and what its bosses do can be stark. In 2016, two years after the Washington-based Fund and Whitehall made up, Mr Osborne threw his support behind Ms Lagarde for a second term, which readers must agree is a splendid coincidence.
Unlike 1976, the UK does not need a crisis loan from Washington, and so the current prime minister may claim he does not require its advice. Yet the IMF is not the only organisation with severe misgivings over Downing Street’s thinking. With weeks still to go before the March budget, Mr Sunak and his chancellor, Jeremy Hunt, have been unusually forward about their plans. If by a fluke of accountancy a few billion can be found to spare, it will be chucked away on a tax cut, either on inheritances or (if Mr Hunt is feeling really flush) on incomes. Meanwhile, the Treasury proposes reductions to day-to-day public spending so large that many think they are impossible. The striking warning this week by doctors and NHS leaders that the health service now faces an “existential threat” is just a foretaste of what is to come across the public sector.
Borrowing to invest in social housing, in public services, in mitigating the climate crisis, makes sense: they are investments in people that should pay their way long into the future. Financial chicanery to bung a few thousand at someone inheriting a large estate is just a cynical attempt to stave off electoral annihilation. Whenever the general election does come, voters will not need the IMF’s guidance to reach that conclusion.
