£5bn spending boost – not so much Plan B as Plan A2
Cabinet said to be discussing capital spending injection after latest IMF warning on growth, claims BBC
WHAT'S HAPPENED?FOR THE third time this year, the International Monetary Fund has cut its growth forecast for Britain – from two per cent at the beginning of 2011, it's now down to 1.1 per cent - and this time it has told Chancellor George Osborne that any further underperformance would warrant a policy U-turn. As a result, Cabinet ministers are discussing a £5bn stimulus plan, according to Nick Robinson, the BBC's political editor.
WHAT DOES IT MEAN?George Osborne remains adamant that there is no Plan B option for the economy - that the austerity programme must stay if the national is to deal with its massive deficit.
But the pressure is mounting. While the IMF spared Osborne the embarrassment of a call for immediate change, as Larry Elliott of the Guardian puts it, fund economists have made it clear the sluggish growth cannot continue if Britain is to avoid a double-dip recession.
The £5bn proposal revealed by Nick Robinson would see spending on roads, broadband and other infrastructure projects that fall under the headline 'capital spending' - not 'current spending' which is the target of the Treasury's unforgiving 'fiscal mandate'.
In effect, this loophole allows Osborne and his fellow ministers to inject money into the economy without being seen to commit a U-turn on the strict austerity policy.
As the Mole puts its, "Osborne will never admit this is the start of Plan B. Better to look at it as Plan A2."
WHAT NEXT?Danny Alexander, chief secretary to the Treasury, told the Today programme this morning: "I just don't recognise the numbers involved or the process as described [in Robinson's report]". The Treasury is also officially denying it.
But the likelihood is Nick Robinson's report is correct in essence. Either Treasury spin doctors need more time to work out how persuade the public – and the Labour opposition – that this is not Plan B in disguise. Or George Osborne wants to tell us about any stimulus plan he may have in his own words when he addresses the Tory party conference in Manchester the week after next.