Irate Brown rejects IMF's warning over deficit

Gordon Brown launched a furious assault on the International Monetary Fund at the weekend after the Washington-based organisation threatened to dent Labour's election campaign by insisting spending cuts or tax rises were needed to cut Britain's budget deficit.

The chancellor chose the most public platform to denounce the fund's forecasting record when he co-chaired a press conference on the state of the global economy with the fund's managing director, Rodrigo de Rato.

With Mr de Rato clearly embarrassed by the onslaught, Mr Brown said he utterly rejected the judgment, in the fund's half-yearly World Economic Outlook, that tougher action was needed to put Britain's finances in good order.

"As far as the IMF's recommendations on the surveillance of the British economy, this work was done in December. It was published then. It is out of date, given the figures that I managed to put forward in the budget.

"It has become even more out of date as a result of what has happened to corporate taxes and other revenues. We will meet our fiscal rules in this cycle and the next. I do not accept the IMF statement about the British financial figures," the chancellor said.

The IMF's rebuke to Britain was particularly galling for the chancellor since he is not only the chairman of the IMF's key policy-making committee, but has also sought to lambast the Conservatives for their budget arithmetic throughout the election campaign.

In its report, the fund said: "Fiscal policy [in the UK] has provided substantial stimulus in recent years and steps are needed to accelerate the pace of fiscal consolidation - which is very modest in the recent budget - to meet the government's budgetary objectives over the course of the next economic cycle."

Mr Brown retorted: "I must say, and I say this with respect to the staff of the IMF, they have been wrong before about British growth. We have achieved higher levels of British growth than have been projected, and I believe the figures are wrong again from the IMF. That is why I will not accept these recommendations.

"We will go ahead with our spending plans as I have set them down because under our public-sector spending plans we meet all our fiscal rules."

A red-faced Mr de Rato left the press conference without comment, although he believes the fund has merely been calling on Britain to meet fiscal rules laid down by Mr Brown himself.

The weekend meetings of G7 finance ministers and the IMF's international monetary and financial committee expressed concerns about the risks to the health of the global economy: high oil prices, weak growth in Europe and Japan, misaligned exchange rates and the size of the twin budget and trade deficits in the United States. "Higher oil prices are a headwind" to growth, said ministers, noting that "expansion is less balanced than before".

The chancellor said action was needed in all parts of the world, although Britain was not mentioned in his list of countries that should take steps to ensure an orderly adjustment of global imbalances.

The US treasury secretary, John Snow, kept up his pressure on China to revalue its currency as a means of cutting the US trade deficit. Mr Brown said greater exchange rate flexibility was "appropriate" but that it was a matter for Beijing to decide.