Osborne talks up progress on G7 united approach to tackle debt

The Chancellor held discussions with the G7 industrialised economies in Marseille yesterday, but divisions over how to stimulate growth have made securing decisive action difficult.

Following Friday’s round of meetings, Osborne said there was a “strong feeling” of support “for credible fiscal consolidation plans for countries with high budget deficits like the one we have in Britain”.

He added: “What’s important now is a concerted international agenda to deal with the global debt crisis and support growth along the lines I set out in London with Christine Lagarde, the managing director of the IMF. I think we are making good progress towards that goal.”

Osborne and Prime Minister David Cameron were forced to defend their economic policy at the start of the G7 talks after International Monetary Fund head Lagarde said the UK’s stance remained “appropriate”, but “the heightened risk” meant a need for a “heightened readiness to respond”.

Cameron said: “We have one of the biggest budget deficits anywhere in the world and that’s why the OECD and Christine Lagarde from the IMF and others have said that Britain is quite a special case with its vast deficit and we have got to deal with that.”

Osborne took delivery yesterday of an advance copy of a report by Sir John Vickers into preventing a repeat of bank bailouts in the future.

The report, published tomorrow, is expected to recommend breaking up the banks – separating high street operations from investment banking.

Shadow business secretary John Denham said: “The publication of the Vickers report on Monday is to be welcomed, as is the indication that banks will be asked to implement a ring-fence between retail and investment arms.

“But of more immediate concern are the small and medium-sized businesses that are crying out for finance today – the Vickers recommendations won’t change that.”