Brown insists IMF sums wrong after claim of budget black hole

Published on Monday 18 April 2005 02:05

Key points

• Gordon Brown claims IMF figures on UK economy are incorrect

• IMF claims chancellor will have to cut spending or raise taxes by 12billion

• Brown also holds rotating chairmanship of the IMF

Key quote

"I do not accept the IMF’s statement. I say this with respect to the staff of the IMF. They’ve been wrong before - we’ve achieved high levels of British growth. I believe they are wrong again." - GORDON BROWN

Story in full GORDON Brown has launched an extraordinary attack on the International Monetary Fund, rubbishing its claim that he has a black hole in his budget and dismissing its British data as unreliable.

The Chancellor was in Washington sitting next to the IMF managing director when he said the global economic watchdog was incorrect in its prediction that he will either have to cut spending or raise taxes by 12billion.

His comments were even more remarkable as Mr Brown holds the rotating chairmanship of the IMF policy committee - and his remarks cast doubt on the accuracy of the entire range of data that it produces.

Late on Saturday, Mr Brown was holding a joint press conference with the IMF managing director, Rodrigo de Rato, who was challenged about the IMF’s claim that Mr Brown is now spending far more than he will collect in tax.

The IMF, which compiled independent economic figures for every country in the developed world, urged "fiscal consolidation" - which could mean the tax rises after the election on 5 May.

"I do not accept the IMF’s statement," the Chancellor said. "I say this with respect to the staff of the IMF. They’ve been wrong before - we’ve achieved high levels of British growth. I believe they are wrong again."

The IMF was using old figures to warn that his budget would unravel, said Mr Brown. "I will not accept its recommendations and we will go ahead with our public spending plans."

The IMF’s warning, however, echoes that made by almost every respected economic forecaster. The Institute for Fiscal Studies, HSBC, Barclays Capital and Deutsche Bank all argue taxes must rise to pay for Mr Brown’s spending plans.

This issue is crucial for the Conservatives, who have a campaign demanding to know "which taxes will rise".

A spokesman for the Conservatives said that Mr Brown denied he would have to raise taxes before the 1997 election. "Straight after the election, he put them up. So we’ve heard it all before," said the spokesman.

The Labour Party manifesto, released last week, pledged that, if re-elected, the top and bottom rates of income tax will not be altered. But there was no pledge on National Insurance, which increased sharply in the 2002 Budget.

In its April report, the IMF said Mr Brown’s budget had delivered a "very modest" tightening in fiscal policy - raising government income mainly by changing the way North Sea oil tax is collected. Prudence would have to return, it argued, if Mr Brown is to meet his so-called golden rule of maintaining a balanced budget.

In Britain, speculation mounted that the Chancellor had been assured there would be "no other contender" for the top job when Tony Blair stands down. Alastair Campbell, the PM’s ex-communications chief, was believed to be thrashing out a succession deal focusing on a future Cabinet, which would include some of Mr Brown’s closest confidantes.

Alan Milburn, Labour’s election strategist, dismissed the reports as "soap-opera".