IMF: Osborne loses his last friend

Even the International Monetary Fund (IMF) is demanding the chancellor adopts a 'Plan B' for the economy, leaving George Osborne with precious few allies left on the international stage.

In a statement which could have come directly from the mouth of shadow chancellor Ed Balls, IMF chief economist Olivier Blanchard said austerity had dampened economic growth.

"We think this would be a good time to take stock," he told the Today programme.

An October IMF report concluded austerity had damaged the economies of wealthy countries more than expected, with spending cuts and tax rises having two to three times the impact experts predicted.

"We said that if things look bad at the beginning of 2013 – which they do – then there should be a reassessment of fiscal policy," he said.

Blanchard claimed the IMF had always urged "slow, steady" austerity measures on the UK economy, but his newfound critique of Osborne will be cold comfort to the left-wing economists who argued against the organisation when they first challenged the chancellor's economic policy.

"After two and a half years of flatlining and a double-dip recession the IMF is now clearly losing patience," shadow chancellor Ed Balls said.

"For many months we have called for urgent action to kick-start our economy. The IMF has said such a 'Plan B' should include policies Labour has long called for – including temporary tax cuts, such as a VAT reduction, and bringing forward long-term infrastructure investment."