`Skilful' Chancellor wins rave review from the IMF

Eve of Budget: The UK gets a glowing report as DTI prepares to boost small business

THE BRITISH economy got a rave review from the International Monetary Fund yesterday. The IMF praised the Government for its "skillful management" and said prompt monetary and fiscal policy responses should ensure that the economic slowdown would be short-lived.

There was room for further interest-rate cuts, the IMF's annual health check concluded. The IMF is forecasts that growth will slow to 0.8 per cent this year, slightly lower than its last published forecast, with the risk that it could be lower if world demand weakens again.

Apart from this caveat, Gordon Brown could not have asked for a more positive assessment on the eve of Tuesday's Budget. The IMF said: "The United Kingdom has significantly improved the architecture of macro-economic policymaking." It went on: "Executive Directors commended the authorities for the UK's impressive economic performance."

A Treasury statement welcomed the findings of the annual "Article IV" consultation. It said: "The Government is now addressing the fundamental structural weaknesses which have held Britain back for decades."

The IMF had special praise for the operational independence of the Bank of England and for the openness of its decisions. Britain had set an example other countries should follow, it said.

The fund welcomed the symmetric inflation target, which allowed the Bank to cut interest rates rapidly as growth slowed. "Monetary and fiscal policies are in a good position to ensure that the slowdown will be limited and of short duration."

The assessment said the Chancellor must stick to his plans to keep government borrowing low, saying his rules to limit current spending and keep the national debt at a sustainable level "did not impose clear enough limits on future policies". It urged him to go further in improving the transparency of fiscal policy, publishing more detail on public spending and on "tax expenditures" such as the new Working Families Tax Credit.

The summary also noted that some of the fund's board of directors were concerned that the national minimum wage could have an adverse effect on jobs.

However, it welcomed the broad thrust of the welfare-to-work measures introduced by the Government. Indeed, it recommended more of the same in order to shrink the poverty trap, although recognising that this would require extra public spending.

The IMF's forecast of growth of 0.8 per cent in 1999 is, as with other recent forecasts, below the 1 to 1.5 per cent predicted by the Treasury in November's Pre-Budget Report. The Chancellor has decided nevertheless to stick to his more upbeat forecast, a move likely to raise some eyebrows in the City.

Inflation will hit the 2.5 per cent target, while unemployment will edge up to 5 per cent on average in 1999, according to the report. The strong pound means that the trade balance is holding growth back. The balance of payments deficit is expected to widen further this year.

The Government's commitment to stability had created a virtuous circle of greater confidence, rising demand, job gains, reduced unemployment and higher asset prices, the IMF said.

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas