George Osborne says UK will welcome IMF oversight
Britain will find itself on a list of systemically important major economies whose economic performance could give rise to such cause for international concern that the International Monetary Fund (IMF) will regularly review them.
The G20 will this weekend agree a set of "indicative guidelines" – criteria for whether a nation will be subject to this higher level of IMF scrutiny. They will cover areas such as a country's budget deficit, trade imbalances, and whether the country's economy is large enough and internationally connected enough to threaten wider "spillover" damage and add to the global economic imbalances.
The Chancellor, George Osborne, told reporters at the IMF's spring meeting in Washington, DC that he expected the UK to be on the list, given our high levels of public and private debt, and he "positively welcomed" the development as something the UK has been "in the forefront of arguing for".
He said: "In future, the IMF will be going into countries and assessing in an independent way their contributions to the imbalances." The UK has noticed the willingness of the IMF to be robust in challenging the US, he added, and he hoped other countries would also respond to the IMF's reviews, though there will no sanctions if they are ignored. Other nations that will be subject to the new arrangements will include the US, China, Germany and Japan, and the IMF intends to treat large trade surpluses, for instance, as seriously as large trade deficits.
As another step in the long struggle by the international community to address the global economic imbalances that contributed to the worst recession in three-quarters of a century, the advent of these new "spillover reports" will be by far the most important achievement of this weekend's meeting of G20 leaders.
The Chancellor also seized upon the latest plan put forward by President Barack Obama to reduce the US federal deficit as evidence that the White House – cited by Labour as the main counter-example to coalition policy on cuts – is now following his example in quickening the pace of deficit reduction. He also pointed to how Spain had managed to win over financial markets with a deficit-reduction plan.
If Labour were in power, he said, Britain would be "totally isolated" and "in no man's land". The American plan will be undertaken only now that its economy has returned to robust growth, in contrast to the UK's more choppy recovery, and Mr Obama's version phases $4,000bn of cuts and tax rises over 12 years, rather than the UK's five-year programme.
British officials were less keen to discuss the succession to Dominique Strauss-Kahn, who is expected to stand down as managing director of the IMF next year. Gordon Brown has been spotted in Washington, and has attended this week a conference in Bretton Woods, scene of the birth of the Fund in 1944, to discuss its future. Mr Brown's job application to succeed Mr Strauss-Kahn, who may enter the race for the French presidency, has been an open secret for many months. One UK source has been quoted as saying the Chancellor would veto Mr Brown's candidature as an "insult to the British people", but officials went no further than "there is no vacancy" and "no one has discussed it yet". Some observers wonder how Mr Brown would be able to say, as senior IMF figures did this week, that the UK is following an appropriate fiscal plan and that its targets will be met when Mr Brown so bitterly opposed these when in office.