Times releases OECD transcripts

By Mark Ferguson / @markfergusonuk

The afternoon attempts were made by the OECD to distance themselves from newspaper reports this morning that suggested a change of heart of the UK’s economic outlook. The reports – which centered around an interview conducted by The Times, were vigorously rebuffed by officials within the Paris-based organisation. It is well known that the OECD usually tries to back up the policies of a sitting government, but a transcript released by The Times (£) this evening suggests that their initial report was correct – OECD economists believe that Osborne should slow down the arte of his cuts due to sluggish growth.

You can see an extract from the interview below:

Extract from interview with Pier Carlo Padoan of the OECD

Q The OECD has been very supportive of the fiscal consolidation plans in the UK. Do you worry that they are going to bear down too hard on growth? I see you have taken your growth forecasts down again, from 1.7 to 1.4 per cent.

A We are incorporating new evidence. We are also saying that fiscal consolidation should be pursued, but at the same time we see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front, and we have seen good and bad news recently. So we not are saying just stick to it, we are saying take that into account. Especially given the fact that maybe monetary policy has less of a policy space to use because of the headline inflation story. So we fully recognize that in this transition phase while moving towards fiscal consolidation, which is needed because of the size of the deficit, that [the] pace of that could be modulated with respect to the performance results.

Q But even if that means potentially meeting fiscal targets a year later? Is that a worthwhile sacrifice to make in a sense?

A That is an intertemporal trade off. I would not say specifically a year later, I would say that you can slow down the pace over the next quarters, if things turn out to be weaker than expected.

Q But you are saying things are going to turn out weaker than expected because your growth forecasts are lower than the official forecasts.

A We have seen that they are a bit weaker than expected; should that continue to be the case then there is scope for, as I said, slowing the pace.

Q Does that mean slower cuts or reversing tax hikes? What’s the right way for a country in this situation to slow the pace of fiscal consolidation?

A I would not reverse the measures I have announced because that would bear down on credibility; I would slow down the pace of spending cuts rather.

Q But that is effectively a reversal in itself though, isn’t it, slowing the pace of spending cuts?

A Frankly if you want to use the reversal fine but it’s not my word.

Q Fair enough. But in any case it’s not like…

A …You are going in the same direction, only at a different speed.