its latest statement
on the UK economy, the International Monetary Fund urges the
Government to rethink its latest plans for a £10 billion squeeze on
tax and spending and bring forward proposals to boost
infrastructure investment, particularly in transport and
The UK is still a long way from a strong and sustained recovery,
warns the IMF, and current austerity plans pose "headwinds" to
growth that risk permanently damaging the prospects for medium term
growth in the economy.
The IMF also expresses concern that the Help-to-Buy scheme is
likely to push up house prices unless further measures are taken to
stimulate an increase in housing supply, and recommends "fiscal
disincentives" for holding land without developing it.
Most media coverage of the IMF statement, which sums up the
outcomes of a two-week fact-finding mission to the UK, has focused
on its criticism of the government's planned spending cuts. But the
IMF is also trenchantly critical of the government's reluctance to
devolve power and resources.
The IMF believes the most effective way to accelerate the
implementation of infrastructure projects is to give more authority
over planning decisions to local authorities, coupled with
financial incentives provided through "greater revenue
Just a few days after the London Finance Commission's report,
about which I blogged last
week, the IMF has come to pretty much the same conclusion -
routing all major public investment decisions through a gaggle of
Whitehall departments is no way to deliver local growth.
Better for government to devolve those decisions to localities and
create incentives for development by allowing localities to share
in the benefits of growth by allowing a much bigger share of tax
revenues to be retained locally.
Commenting on the London Finance Commission's report in Public
Finance, Steve Freer, Chief Executive of CIPFA, argues that one
reason why the Commission's proposals could win wide support is
that they propose better arrangements for London which are not at
the expense of other areas.
Quite the reverse - reform in London would probably be supported
by other cities as a stepping stone towards getting the same deal
In contrast, the New Homes Bonus, virtually the only fiscal
incentive for promoting local development, simply redistributes a
fixed pot of government grant to those councils which enable the
most new homes - at the expense of areas where there is less
development. Both parts of the IMF message need equal attention in
any government rethink of economic strategy.