19/12/2003

IMF report praises UK finances while recommending prudence

The performance of Britain's economy has been "enviable" as it heads towards recovery, a team from the International Monetary Fund (IMF) has said.

At the end of its mission to the UK, which took place from December 4-18, the IMF published a report which also called for "prudent" management of the UK economy at a time of financial uncertainty.

In its report, the IMF said: "In the face of sizable global shocks over the last few years, the performance of the UK economy, supported by stimulative macroeconomic policies, has been enviable."

However, the IMF also highlighted the risk that a sudden drop in house prices could affect the economy. However, they believe that this risk has been lowered by improved monetary and fiscal frameworks introduced during the 1990s.

The report recommended that the Chancellor be prudent while inflation is low, adding: "We see a case for pre-emptive, gradual tightening of monetary policy as signs of recovery are confirmed."

The IMF believes a key long-term challenge for the UK is to ensure adequate provision of pensions for its ageing population. They view the government's strategy of promoting voluntary private savings as appropriate, but advise that the performance of this strategy will need to be assessed periodically. Accordingly, it welcomed the creation of the independent Pension Commission that has been charged with this task.

However, the Shadow Chancellor Oliver Letwin said that cloaked within the IMF report was a warning that Gordon Brown's stewardship could lead to tax rises.

"The concluding statement makes it perfectly clear that the IMF believes Gordon Brown will have to raise taxes if he intends to continue with his present spending path," he said.

"The IMF believes he needs to take action in the 2004 Budget. I am afraid I do not believe that Gordon Brown intends to let the nation's electors realise that he intends to raise taxes until after the next election.

"He is borrowing now in order to postpone taxes rises until after the next General Election.

"The IMF can see it. Independent commentators can see it. We can see it. It is time for Mr Brown to start admitting it."

(GB)

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