The International Monetary Fund (IMF) has "declared peace with Britain in its long-running dispute over austerity" by accepting that the chancellor's deficit-reduction programme was "appropriate" and praising George Osborne's plan for being "well-balanced", says Philip Aldrick in The Times.
A year ago, the IMF urged the chancellor to raise spending to boost growth and warned that he was "playing with fire" on economic policy; advice he "duly took exception to" and ignored, says Chris Giles in the Financial Times. The IMF has since upgraded its 2014 forecast three times over the past year, from 1.5% to 2.9%.
It's not the first time the IMF's suggestions have "fallen by the wayside", says Juliet Samuels in The Times. In 2012 and 2013, it controversially called for George Osborne to borrow more to fund infrastructure investment. Last year, it proposed that Britain should expand the range of products subject to VAT.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
It may not seem so, but "more often than not", chancellors are delighted to receive tough advice from the IMF during itsannual economic inspections, says Giles. It "chimes with theirarguments within government and provides cover for themto attack domestic vested interests".
Latest Videos FromMoneyWeek
Last year, for once, thepopular narrative of the IMF rapping the government on theknuckles only for ministers to fight back, held good. But thatdoes not mean we should disdain the IMF's advice this year.
It's all very well to demand a "grovelling apology" for gettingit wrong, but the IMF's "traditional role in helping to framea sensible economic debate for Britain's future is far moreimportant".
Nor should we overlook the less nice things the IMF had to say,says Larry Elliott in The Guardian. Two major risks remain, in itsview.
Firstly, that unless productivity starts to recover, growthwith eventually stall. Secondly, to prevent another propertyboom-bust, pre-emptive action should be taken.
The IMFwould like to see a limit on the number of high loan-to-incomemortgages, and "politely suggested" that the government'scontroversial £12bn Help to Buy mortgage guarantee schemecould be modified, or even shut down early.
