The flaw in the thinking of Osborne, the IMF, the EU and the US is exactly the same: they’ve missed the boat when it comes to deficit reduction.

Just a couple of hours ago the IMF issued its annual report on the UK economy. It said the government should maintain its current course, and so naturally the Coalition is exultant. Well, the Cameroon bits of it are: Vince Cable has remained silent on the matter.

The problem I have with the International Monetary Fund (and this will get worse now the Americans have decided to endorse Christine Lagarde as the new MD) is that, for an organisation carrying so much esteem around with it, it does talk a huge amount of tripe. And it also has an irritating tendency to do the yes-and-no-with-reservations bit.

Take this latest report being hailed by Draper Osborne:

‘The weakness in economic growth and rise in inflation over the last several months was unexpected. This raises the question whether it is time to adjust macroeconomic policies. The answer is no as the deviations are largely temporary’.

So there, and yah-boo sucks to Balls & Co. But a paragraph later, we read:

‘However, there are significant risks around the economic outlook. If growth faltered further and inflation also eased, then a mix of more quantitative easing by the Bank of England and tax cuts aimed at the poor and to help investment would need to be considered’.

So the Government is right, but pretty soon it’ll probably be wrong.

George Osborne (an old hand when it comes to IMF double-talk) anticipated this when he told the BBC this morning:

“We have flexibility built into our plan…..what our plan provides is credibility where there was no credibility, stability where there was no stability, and confidence that actually the British economy is getting its act together.”

Except it doesn’t actually, George – and much as I support what the original idea of your policy was, that statement is 90% waffle. There is certainly more credibility than there would be if the Big Eds were gaily chucking money around on yet more local council feasibility champions and inspection inspectors. But all things are relative, and credibility is no exception: Government spending is NOT falling, and output is NOT rising.

As for stability, the economy is certainly stable: it’s been flatlining along with barely a blip in any direction for some time. And let’s get real here – we still have a pathetic 12.7% of the economy actually making something tangible, we are still losing share in export markets, and even financial derivative shuffling and liquidity-pool fishing is stuttering now. We have precisely the same problems as the PIIGS in one key area: we do not have a credible economic base from which to earn money to pay off our debts. The numbers speak for themselves: recovery with the economy as currently configured is a fantasy.

So in short, there are no signs at all that the British economy is ‘getting its act together’: the only thing it’s ‘getting’ is nowhere.

But nor should we really pay any attention to the IMF any more. In the 1970s, things were different: the mad folks were in complete control of the UK, and the IMF in those days had some serious heavyweights with realistic budgets. None of that is true today: Dominic Strauss-Kahn’s bulk may be enough to pin down a Sofitel chambermaid, but not many real people in the markets saw him as a serious player. Lagarde, of course, is a giant leap in the wrong direction on that score: not only are her economics academic, she’s going to be under US influence anyway: but the US hasn’t a clue what it’s doing right now – and even less idea of what to do next.

Let’s also try and remember what the ‘M’ in IMF stands for: it is fundamentally a monetarist believer. No harm in that, but it doesn’t have any real depth when it comes to wealth creation to correct monetary wrongs. Hungary has already sent it packing with a large flea in each ear, and to date the IMF ClubMed recommendations have made the situation there worse, not better.

The IMF is a fiscal and financial guru-shop, not a business consultant. The major flaw in its EU advice is the same flaw in the Coalition cuts strategy: the process has been started much too late to make any difference.

Here are a couple of realities the IMF hasn’t considered, and Osborne probably has – but doesn’t like to think about it:

1. Banks bought 91% of the £39.8bn of net issuance of new gilts in the last six months – compared to the mere £11.4bn of UK debt they bought in the preceding six months. It’s an overused term these days I know, but this is just a giant Ponzi scheme: money going round in circles, Peter paying Paul to pay Peter back to give the money back to Paul. It’s a joke. Had the Labour Government collapsed a year earlier and Cameron not made a complete cod’s ear of the Election, when it comes to the debt/new growth race, we might just have nicked it. But not now. Mervyn King knows the game’s up: he’s spinning out the time in vain hope of a miracle

2. This week’s YouGov/Sunday Times poll has topline figures of CON 37%, LAB 42%, LD 9%. The current projections of pollsters in total suggest Labour would have an overall majority of 42, were an election to be held tomorrow. As the situation is obviously going to get a great deal worse – and the Coalition has failed miserably to either explain what it’s doing, or stand up to the banks – I really don’t think there is any point in listening to the IMF any more. Apart from anything else, there isn’t enough capital in the whole place to sort out the UK’s black hole of debt.

Once again in Whitehall, there is idle chatter about the need for a Plan B. There can be no Plan B – or C through to Z. Plan A was the only one left: but that window has been missed by being too slow, too weak, and above all too late. The only thing awaiting us now is the Reckoning.

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