Darling faces rebuke from IMF

By DAN ATKINSON, MAIL ON SUNDAY ECONOMICS EDITOR
Updated:

 

Alistair Darling's plans to let rip on public borrowing face criticism from the International Monetary Fund.

Alistair Darling

Darling: Plans were not welcomed by IMF

The Chancellor and Gordon Brown insisted last week it was right for the Government to plunge deeper into the red to keep the economy moving during the credit crunch.

But Darling can expect a public rebuke from the IMF when he travels to Washington next month for the fund's annual meeting, and to face calls for tax rises, spending cuts - or both.

Alarm bells were ringing at the IMF about UK public finances, even before last week's pledge over borrowing.

Now the fund, which has a duty to warn against financial imbalances in the world system, is expected to urge Darling to put his house in order.

This is a double humiliation for the Treasury. The Prime Minister served as a highly regarded chairman of the IMF ministers' committee between 1999 and 2007, setting the seal on Britain's status as a well-managed economy.

Sharp criticism from the IMF would recall one of the darkest moments in Labour history, the sterling crisis of September 1976 that forced Britain to ask the fund for an emergency loan.

'I assume the IMF will criticise the UK,' said Howard Archer, economist with independent forecasting group Global Insight. 'All the rules that were supposed to control public borrowing have gone.'

Gerard Lyons, chief economist with international bank Standard Chartered, said: 'The fiscal position is a complete mess. I would expect the IMF to say something quite strong about it.'

Charles Davis of the Centre for Economics and Business Research said: 'I suspect we will have our knuckles rapped, but the IMF may agree that spending needs to rise in the short term to stabilise the economy.'

Last month, the IMF's annual assessment of the UK economy called on Darling to maintain the limit of public debt at 40% of gross domestic product.

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