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Change your approach, George

PA0500015At the start of the week it was the Prime Minister that was under the lash. Now it’s the Chancellor. And not by the swivel eyed, but the clear-eyed International Monetary Fund (IMF).

They tell George to get his finger out and take some action to boost the economy.

They make the point that the country is “still a long way from a strong and sustainable recovery”.  A point of view that far to many Welsh people is aware of as they search for work.

But they make the specific criticism of the Chancellor’s plans for this year that the £10bn cuts and taxes he’s embarking on will be a drag on growth. Their message is clear and unambiguous; the policy ought to change so that the economy can be kick-started.

They say,  “In a range of policy areas, the government should be more supportive of growth. What is important now is not to make a mistake today and presume that all will be well with the economy some years from now. I think it’s important to get started on infrastructure projects that will support the economy.”

Many economists have been urging the Chancellor to change course for some time with little effect. Lets hope that the Chancellor listens to the IMF but his track record of taking sound advice is not good.

An area of government policy that the IMF are concerned about is the proposal from the March budget the Help to Buy scheme. They reckon that its main impact will be to push up house prices. A better approach according to the IMF would be to impose a tax on unused development land. This would see more houses built and rather than fuel house price increases would have the opposite effect.

In Wales with the real shortage on the supply side of housing a capital programme of house building would provide a real answer to the dual problem of increased homelessness and high unemployment. It is this that’s required than gimmicks that just inflate house prices.

All in all the IMF provide a sharp reminder that the economy needs a transfusion rather than to be bled further if the patient is to recover.


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