The International Monetary Fund has declined a request from UK lawmakers to explain to Parliament why it made an unsolicited attack on the former government’s budget shortly before the plan imploded.
(Bloomberg) — The International Monetary Fund has declined a request from UK lawmakers to explain to Parliament why it made an unsolicited attack on the former government’s budget shortly before the plan imploded.
Harriett Baldwin, chair of the Treasury Committee in the House of Commons, has asked IMF officials to give evidence about the statement they made on Sept. 27. The fund at the time urged former Chancellor of the Exchequer Kwasi Kwarteng to re-evaluate his tax-cutting “Growth Plan.”
Asked by the committee on Monday about the intervention, Beth Russell, the second permanent secretary at the Treasury, said “it was a bit unusual to have that commentary outside a formal engagement.”
She added that the government “didn’t have sight of the statement in advance” and that private discussions were held with IMF officials afterwards.
In an emailed statement, the IMF said it “engages with governments, central bank officials and often with parliamentarians” during the regular annual UK check-up. “Discussions with authorities typically happen in that context.” It declined to comment specifically on the request to appear before the committee.
The Washington-based institution normally reserves its uninvited public critiques to less developed nations that are not major shareholders. The UK is a founding member of the IMF.
Speaking four days after Kwarteng’s fiscal statement, at a time when the pound was plunging and UK government bond prices were in free-fall, the IMF said it was “important that fiscal policy does not work at cross purposes to monetary policy.”
“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and un-targeted fiscal packages at this juncture.” It also said the UK plan would increase inequality.
The comment came just hours after former US Treasury Secretary Larry Summers called Kwarteng’s plan “utterly irresponsible” and said he was “surprised that we have heard nothing from the IMF” given the risk of “a currency crisis in a reserve currency.”
The day after the IMF statement, the Bank of England launched an emergency intervention in long-dated government bond markets to prevent a fire-sale of assets that threatened to cause an economic crash. The market reaction to the ill-judged fiscal statement prompted Prime Minister Liz Truss to step down after just 44 days in office.
Truss was succeeded by her arch rival in the summer’s Tory leadership contest, Rishi Sunak, who has ripped up her “Growth Plan” in a bid to restore economic stability.
Baldwin, a member of the ruling Conservative Party, told Treasury officials at a hearing on Monday, “We have invited the IMF to come and give evidence to the committee. So far they have not agreed to give us any evidence on the record.”
“We would like to ask them questions about this particular incident as they were so explicit about making commentary, and we feel it’s very much in the scope of what we should be looking at.”
James Bowler, the Treasury’s top civil servant, acknowledged that the IMF had given evidence to the Treasury committee about the economic recovery from Covid.
The IMF has a satellite UK office at the BOE in London, where two or three of the fund’s staff are based.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
