IMF has a point on fairness of Budget
Published 20/12/2012 | 17:00
THE letters I, M and F still strike fear in the hearts of many people across the world.
In Chile, the International Monetary Fund remains a synonym for evil and is chiefly remembered as an organisation that supported General Augusto Pinochet's torture squads. In the Far East, governments from Thailand to Indonesia still amass huge savings to ensure that economic collapse will not trigger another IMF bailout with all sorts of odious strings attached.
It is true that the IMF has changed. It is no longer in thrall to right-wing economists such as Milton Friedman but it could still not be described as anything approaching socialist.
There must have been a few wry chuckles in Government circles yesterday when the IMF took the Budget to task for being unfair to some of the poorest people in our society. To many it must look rather like Hannibal Lector ticking off Jack the Ripper for hurting people. But we should pay attention; the IMF has a point.
The Fund's main complaint is that cuts to universal benefits such as child benefit and pensions which remove the same amount from the pockets from everybody regardless of income. It is a policy that makes so little sense that Ryanair's Michael O'Leary has complained that child benefit resembles Government subsidies for people to procreate. Like the IMF, Mr O'Leary wants benefits targeted at those who really need them rather than millionaires like him. It is hard to disagree.
The IMF is not alone in raising questions about the fairness of the Budget. The government-funded Economic and Social Research Institute pointed out that the bottom third of society will endure bigger cuts to their income than the top third. This is obviously not a comfortable position for the Labour Party.
That the IMF itself feels compelled to enter the political debate is a sign of unease about the Budget in Washington as well as Labour's backbenchers. Party grandees such as Pat Rabbitte may have brushed off criticism from his commrades as pirouettes on the plinth but it would be interesting to know what they think of the IMF's fears for those most in need of the State's help.
Perhaps the Fund is simply doing its own pirouettes or perhaps it has a serious point to make?