Money watchdog warning to Brown
The International Monetary Fund warned British Chancellorof the Exchequer Gordon Brown today that he must rein in public spending or face the prospect of putting up taxes.
In its latest health check on the British economy, the world financial watchdog said that public finances had “deteriorated sharply” over the past five years.
At the same time, it said that the Treasury’s predictions that tax revenues would pick up appeared to be “somewhat more optimistic than warranted”.
It warned that Mr Brown could be forced to make a “fiscal adjustment” - cutting spending or raise taxes – if he is to carry on meeting his own rules on managing the public finances.
It added that a reduction in public spending would be less damaging to the overall economy than putting up taxes.
The Chancellor, in Brussels for a meeting of EU finance ministers, rejected the IMF’s advice, and defended his policy of investment in public services.
“Where a country like Britain, with long-term under-investment in transport, health and education has taken tough decisions at the start of the economic cycle to substantially reduce our national debt, it makes sound sense to borrow for investment, to correct that historic under-investment, to improve public services and promote growth,” he said.
“With our urgent need to continue to invest in education, transport and our public services, it is right for Britain to reject any proposals that would cut investment in our infrastructure and public services, whether they come from the European Commission, the IMF or any other quarter.”
Earlier, the Chancellor also dismissed European Commission proposals to set up the monitoring of the national economies of the EU member states to ensure that they comply with the rules on single currency.
