George Osborne's austerity plan came under attack today from the International Monetary Fund (IMF) after it downgraded the outlook for UK growth by more than any other advanced economy.
The IMF - which cut the UK's growth outlook for 2013 to just 0.7%, down from 1% - said Osborne (pictured) should reconsider his austerity plan because of a lack of demand.
The report issued a specific note covering the UK, saying that since "recovery is weak owing to lacklustre demand, consideration should be given to greater near-term flexibility in the fiscal adjustment path".
The IMF, which also cut its 2014 growth forecast for the UK from 1.8% to 1.5%, urged the Bank of England to buy up a wider range of assets via QE in order to boost growth.
It said: "In the United Kingdom, other forms of monetary easing could be
considered, including the purchase of private sector assets and greater transparency on the likely future monetary stance."
IMF chief economist Olivier Blanchard added "it is really time [for the UK] to consider an adjustment to fiscal consolidation plans."
The comments are a further embarrassment for a Chancellor who has faced growing criticism of his handling of a UK economy that is failing to accelerate and has now been stripped of its AAA credit rating by Moody's.
The IMF's 0.3 percentage point cuts to both its 2013 and 2014 forecasts means the UK growth downgrades are greater than those announced for any other major economy, including the US, Italy and Spain.
On a global view, the IMF said in its latest World Economic Outlook report that the world economy was in danger of moving from being a "two-speed economy" to a "three-speed economy" as the US picks up pace and Europe is left behind.
‘Important to have an anchor’
Lack of innovation for solutions
Some 2,000 consumers affected
Achievements, charity work and other happy snippets