IMF issues warnings to Conservative government over austerity and Brexit

The International Monetary Fund has advised Chancellor George Osborne to ease austerity measures and invest in infrastructure.

During the G20 summit of finance ministers, IMF chief Christine Lagarde also warned against the UK leaving the European Union.

In a report published at the summit, the IMF said the Treasury needs to “remain vigilant to the challenges ahead and to continue its policy efforts to promote growth and further boost resilience”.

The IMF’s report said: “Flexibility in the fiscal framework should be used to modify the pace of adjustment in the event of weaker demand growth.”

The report comes after Organisation for Economic Co-operation and Development last week called for the Government to ease austerity and invest in infrastructure.

The OECD’s chief economist, Catherine Mann, said: “With governments in many countries currently able to borrow for long periods at very low interest rates, there is room for fiscal expansion to strengthen demand in a manner consistent with fiscal sustainability.”

The Treasury chose not to comment on the report.

On the EU referendum, Lagarde told CNN CNN: “Uncertainty is bad in and of itself. No economic player likes uncertainty. They don’t invest, they don’t hire, they don’t make decisions in times of uncertainty.”

Kenneth Gibson MSP, convener of the Scottish Parliament’s Finance committee said: “Today’s intervention should make the UK Government sit up and take notice.

“The fact is that the Tories are imposing austerity out of choice rather than of necessity, cutting Scotland’s Budget year on year and putting the health of our economy at risk in the process.”