Brown rejects calls by IMF and EU to cut spending

Click to follow
The Independent Online

Gordon Brown yesterday angrily dismissed calls by the International Monetary Fund and Brussels to cut his spending plans to bring the public finances back into line.

Gordon Brown yesterday angrily dismissed calls by the International Monetary Fund and Brussels to cut his spending plans to bring the public finances back into line.

The IMF, the global financial watchdog, called for a £12bn cut in spending while fellow EU finance ministers rebuked the Chancellor for running a deficit above 3 per cent of GDP in breach of the Maastricht treaty.

The warnings, which will embarrass the Chancellor so close to next Wednesday's Budget, took the shine off an otherwise upbeat report by the IMF on Mr Brown's performance.

The Chancellor was swift to respond, saying the UK's success in cutting debt - in contrast to its European rivals - meant it should be allowed to spend on much-needed infrastructure investment. "It's right for Britain to reject any proposal that would cut investment in our infrastructure, whether these proposals come from the EU Commission or the IMF or any other quarters," Mr Brown said on the sidelines of a meeting of EU finance ministers in Brussels. "Countries with a current surplus and low levels of debt should not be prevented from investing in their infrastructure."

In its annual health check of the British economy, the IMF urged Mr Brown to take "expeditious" action to cut spending or start charging for public services to ensure the public finances stay on track. The report said: "On the staff's projection the golden rule would not be met in the next cycle. Directors suggested restraint in current spending. If more reliance on revenue measures were desired, broadening the tax base would be preferable to raising tax rates."

The report recommended cutting spending by 1 per cent of GDP - £12bn at current prices - over the next five years.

The comments overshadowed the first acknowledgement by the IMF that Mr Brown is almost certain to meet his golden rule in the current economic cycle, that will end this year or in 2006. "The sizeable initial current and overall surpluses virtually ensure that the rules will be met," the report said.

It praised the Government for its "skilful macroeconomic management" and welcomed the "continued robust performance of the economy".

In Brussels, EU finance ministers said: "The budgetary stance in the [UK's] programme does not seem to provide a sufficient safety margin against breaching the 3 per cent of GDP threshold with historic macroeconomic fluctuations at any point during the projection period."

Comments