Twice a year, the IMF releases its World Economic Outlook. The most recent was published on 11 October 2022.
Some on the extreme right have been claiming that it is a clear vindication of Truss and Kwarteng’s disastrous Budget, and even that this Budget will make Britain the “fastest growing country in the G7.”
We wrote recently about how, as the government increasingly fails to perform, it is forced to rely on rhetorical tricks like reality inversion and traitriotism. And these tricks appear to be a coordinated campaign.
In that context, it is worth examining how much reality inversion (and traitriotism) these particular claims contain.
Here is one example: this tweet is from a Conservative Councillor using a standard Conservative Party graphic: many others have also been using it.
It is an excellent example of reality inversion with a dose of traitriotism thrown in:
- The IMF has in fact been highly critical of the Budget;
- The IMF database shows that the UK has one of the slowest growth rates in the G7 and beyond; and
- The tweet both inverts reality and implies that not believing the lies is unpatriotic.
The IMF Has Been Highly Critical of the Budget
The IMF’s latest report covers the entire world and has been in preparation for six months. It does not focus on the UK and has not been updated to address the (ever-changing) contents of the Truss/Kwarteng Budget. The IMF’s report said:
“In the United Kingdom too, a significant slowdown is projected. Growth is forecast at 3.6 percent in 2022 and 0.3 percent in 2023 as high inflation reduces purchasing power and tighter monetary policy takes a toll on consumer spending and business investment.
This forecast was prepared before the announcement (September 23) of the sizable fiscal package and incorporates a less substantial fiscal expansion. The fiscal package is expected to lift growth somewhat above the forecast in the near term, while complicating the fight against inflation.”
Previous statements have, however, been more focussed on the UK: the IMF commentary on the Budget was highly critical and urged the government to “re-evaluate” its plans:
“We are closely monitoring recent economic developments in the UK and are engaged with the authorities. We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures. However, given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy. Furthermore, the nature of the UK measures will likely increase inequality. The November 23 budget will present an early opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high income earners.”
In summary, the IMF’s concerns about the Budget are:
- That its largesse is untargeted: rather than spending where money is most needed, it provides tax cuts and eliminates bonus caps, putting money where it is least needed;
- That it will increase inequality, which is already high in the UK;
- That it sets the Government at odds with the Bank of England.
This last point deserves a quick explanation. The government’s plan was to boost growth by cutting taxes, putting more money into the hands of (rich) people. That would have two effects:
- To increase government debt unless savage spending cuts were introduced – and the government has not been clear about how savage it intends to be (this is a point of great contention within the Conservative party)
- To increase inflation.
As we have written before, a key part of the mandate of the Bank of England is to keep inflation to 2%, and the only tool they have in their tool bag is to raise interest rates. So if the government presses ahead, the BoE will respond by raising interest rates further – and this will cause many businesses and households to go bankrupt.
The IMF database shows that the UK has one of the slowest growth rates in the G7
The chart used in the Tweets has been carefully selected to show a tiny fraction of what the IMF data say about UK growth. Here is a rather more complete picture of the UK compared with the rest of the G7 over time.
As you can see, this is not a picture in which UK growth compares favourably with the other G7 members: in fact, depending on the time-frame chosen Britain is the second-worst (or even the worst) performer in the G7.
But perhaps the G7 is an unfair comparator group. What about a broader comparison with other countries around the world?
Note: Some of the fastest growing countries, like China and India have been excluded from the chart as they are literally off-the-scale.
The IMF data show that whether you merely look historically (the x-axis) or take into account likely future prospects (the y-axis), under the Conservatives, the UK economy has been and will continue to be an underperformer.
The tweet reverses reality and implies that not believing the lies is unpatriotic
The Tweet that we started with is a good example of how, having failed to deliver in reality, the Conservative Party is resorting to systematic disinformation to convince the UK population that they have performed and will perform acceptably. Furthermore, the Tweet suggests that believing the lies and being positive about them is the patriotic stance. By implication, calling out the lies and pushing for a sane economic policy is unpatriotic.
As we have seen the reality is the opposite. On current plans, many businesses will struggle, and some will not survive. Many people will suffer great hardship, and some will die. Anyone who truly cares for their country will want to stop the rot as quickly as possible.
In the short term, the damage can only be halted if the Conservative Party halts it. And the party will only halt it if Conservative MPs are convinced that their electoral prospects depend on a rapid removal of Truss and Kwarteng and a complete U-turn on their policies.
Two things will encourage them to act:
- Being far behind in the polls (they are)
- Receiving a huge volume of letters from constituents making it clear that they will never vote Conservative again unless the party acts now.
So please write today. These notes make it easy – all you need to know is your own post-code!
And if you would like to help more, take a look at the 99% Organisation and join us.