OECD Urges UK to Cut

The Parisian-headquarted Organisation for Economic Cooperation and Development (OECD) has just published information urging George Osborne, the UK Chancellor of the Exchequer, to continue to cut spending. George Osborne had already stated just a few days ago that he was going to carry on regardless of the advice to the contrary from the International Monetary Fund. Now the OECD statement seems to be in line with his thinking. Despite the cut in growth that the OECD has forecast for the UK, the economic think-tank has suggested that the UK is on the right track and must continue in its austerity measures.

The OECD had originally forecast a projected increase in growth of 1.6% and that is now marginally down to 1.5% for 2014. Global recovery is still being hampered and that is particularly the case in the EU. Both the public and the private sectors are still suffering economic setbacks. The consequence of all of this will be a reduced growth prospect for the UK and for other countries.  Uncertainty of the markets and consumer-spending are still not high enough to bring about increases that had previously been predicted.

UK government debt is set to rise still further and therefore the OECD suggests maintaining the present economic cuts in budgetary spending. Fiscal consolidation will bring back public finances to acceptable levels of sustainability according to their report.

Britain has a projected growth increase of 1.5%, while the USA’s growth is forecast to increase by 3% in 2014. The UK still has more effort to make regarding investment and progress must be made in housing programs and job creation (unemployment seems to be stuck in the UK at the 8% mark, while it is set to fall from 7.5% in the US). The US was recognized as having successfully completed a re-capitalization program of its banking system, allowing it to get out of a rut. However, the Obama administration was strongly criticized for planning budget cuts at a time when the country’s economy is starting to move forward. The recovery is not entirely operational and they advised the US to lay off the cuts. However, for George Osborne in the UK, the news came as a welcome backing to his present spending-cut program. The UK has too high a deficit still and little investment in the future.

The OECD believes that the EU economic recession will lead to further problems worldwide still over the coming months. However, whatever the European Central Bank decides to do, the OECD has predicted that the Eurozone will exit recession in the next six months (despite Spain and Italy still dragging them down). The ECB was criticized for not following the Quantitative Easing methods of the Bank of England and the US Federal reserve and its preference for acting as the insurer of last resort to those that are struck by debt. It was suggested that the ECB should lend more to businesses to boost their growth prospects and fuel growth.

The OECD is made up of 34 member countries of the wealthiest nations in the world and was founded in 1961.

 

 

See our previous article about George Osborne’s decision to plough ahead with government spending cuts in the UK regardless of the advice of the International Monetary Fund: http://www.tothetick.com/osborne-carry-on-regardless

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