The IMF was not wrong when it pointed out this week that by offering pre-election tax cuts, the Chancellor is turning a blind eye to the precarious state of the fiscal position. To meet his fiscal rules, the Chancellor is banking on large real term cuts to unprotected departmental spending. This is why we think a fiscal giveaway in March will almost certainly be followed by a fiscal takeaway after the election. And why we think looser fiscal policy now won’t prevent an interest rate cut in the summer.
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