IMF echoes Salmond's call for Plan B

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First Minister Alex Salmond's call for stimulus funds to boost the economy
has been echoed by the IMF IMAGE:STOCKPIX.EU

Scottish news: IMF echoes Salmond’s call for Plan B

The International Monetary Fund (IMF) has echoed First Minister Alex Salmond’s call for Westminster to release money to invest in jobs and infrastructure.

According to the IMF report, Britain risks permanent economic damage if Westminster refuses to adopt fiscal stimulus measures to reverse the pain caused by UK’s economic crisis.

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First Minister Alex Salmond had warned that Scotland will continue to “bump along the bottom” unless the Treasury releases a £5bn UK-wide infrastructure investment which can be ploughed into "shovel ready" infrastructure projects.

The IMF report places increasing pressure on the Labour party in Scotland to support the First Minister’s calls which were also backed by industry leaders. Labour appear to be opposing austerity on a UK level whilst in Scotland aligning themselves with the Conservatives in opposition to independence which would allow Scotland to follow a different path from David Cameron's.

Holyrood Finance Committee member Mark McDonald (SNP) said: "This report shows that the interests of the people of Scotland would be best served if Labour backed the First Minister’s calls for increased investment in shovel ready projects.

“If Labour is serious about staving off the negative effects of the Westminster government’s present approach then they should join the SNP in calling for this increased capital investment."

Ten more years of UK austerity

The report comes after Prime Minister David Cameron admitted in an interview with the Telegraph that his government’s austerity programme which was designed to last for five years will now likely last a decade. Mr Cameron indicated a desire to cut taxes by reducing public spending further - a policy the IMF is now saying the Tory-led coalition government should rethink.

The IMF report also states that the Westminster government's tax rises and spending controls since spring 2010 have cut Britain's growth by a cumulative 2.5 percent of GDP over those two years.

Earlier this week, the IMF slashed its forecasts for the UK's GDP growth this year to 0.2 percent from its previous estimate of 0.8 percent. The country's growth forecast for the next year was revised downward to 1.4 percent from 2 percent.

What the IMF report did not factor in was the Bank of England's move to print (quantitative easing) an additional £50bn in order to lend to private banks. Sir Mervyn King, Governor of the UK's central bank, is said to favour lowering interest rates further in order to make money cheaper for high street banks to borrow. Mr King's lower interest rate policy contradicts advice recently given from the Bank of International Settlements (BIS) which argues that lower interest rates are causing economic contraction.

Meanwhile the UK's financial sector crisis which many economists blame for the UK's economic decline seems to rumble on with further revelations of fraud and mismanagement. Move Your Money spokesperson Louis Brooks said: “How can the UK consumers have faith in the banking system when every day a new scandal emerges which sees not only banks but also the ministers and regulators tasked with protecting the public interest facing serious questions over their conduct? This is endemic corruption which reaches the uppermost echelons of our establishment."

The key economic argument against Scottish independence for Unionist politicians is the global punch which the City of London confers on the UK economy. With London's financial system now facing irreversible reputational damage that argument will now come under increasing scrutiny.

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published this page in News 2012-07-20 14:23:21 +0100