By Vivienne Russell | 22 May 2013
Councils should be given more control over planning and allowed a greater share of new revenues to speed up much-needed investment in infrastructure, the International Monetary Fund has said.
Its latest review of the UK concludes that the economy is still a ‘long way from a strong and sustainable recovery’. The government’s fiscal policy is acting as a drag on growth, it said, citing discretionary cuts of £10bn planned for the current year as positive 'headwinds’.
Greater investment in supply-side measures would enhance rather than damage credibility, the IMF added. It urged UK ministers to adopt several ‘growth-enhancing initiatives’ to offset the drag from fiscal consolidation and help boost the recovery.
Chief among these was picking up the pace on capital investment where possible. The IMF also backed the findings of Lord Heseltine’s review on local growth, saying his recommendations should be ‘pursued with vigour’.
It went on: ‘Investment in infrastructure, notably in transport and energy, could be supported by streamlining the planning application process and removing regulatory uncertainty.
‘To accelerate the implementation of infrastructure projects, more authority over planning decisions should be devolved to local authorities, with financial incentives provided through greater revenue sharing.’
The IMF also echoed outgoing Bank of England governor Mervyn King’s warning that the Help to Buy scheme, announced by Chancellor George Osborne in this year’s Budget, could drive up house prices if housing supply were not also increased.
‘To mitigate this risk and engineer a supply response, the government should consider fiscal disincentives for holding land without development.’
Elsewhere, the IMF praised the Bank of England’s ‘vigorous and appropriate’ monetary policy response. Quantitative easing and the Funding for Lending scheme, introduced to encourage banks to lend to business, were described as welcome initiatives.
