Rachel Reeves was in her element at the International Monetary Fund’s annual meeting in Washington last week.
As she patrolled the halls of IMF headquarters in a pale blue trouser suit, I watched as she was periodically stopped by central bankers and finance officials from around the world, all eager to take selfies with Britain’s first female chancellor.
At one point, she even posed against a balustrade on the balcony overlooking the spacious main hall while fans, both male and female, took her photos.
None of his recent Conservative predecessors, such as Jeremy Hunt or Philip Hammond, attracted the same level of attention.
Chancellor Rachel Reeves with, from left, Canadian Finance Minister Chrystia Freeland, US Treasury Secretary Janet Yellen and ECB President Christine Lagarde.
And out of the media’s sight, Reeves engaged in some discreet economic diplomacy with US Treasury Secretary Janet Yellen – his role model – and chatted with IMF Managing Director Kristalina Georgieva.
As one of the Chancellor’s team members explained, she was “getting the ball rolling”, softening up the relevant people for the tax rise measures to be announced in this week’s Budget.
And yesterday it was all worth it. In a rare intervention, an IMF spokesman backed the Chancellor’s huge £40bn fiscal blow, saying it would boost growth “sustainably” and noted that the new budget rules showed the government was committed to reducing the UK’s debts. in the long term.
The IMF’s unusually exaggerated backing topped the news bulletins on Radio 4’s flagship current affairs show Today, with the presenter almost triumphantly announcing: “Chancellor Rachel Reeves has secured the backing of the International Monetary Fund for yesterday’s budget and its increases.” of great success in spending, taxes and debt.’
Not to be outdone, BBC economics editor Faisal Islam described it as “useful support for the Chancellor”.
As the economic enforcer of the global financial system, the IMF typically seeks to be carefully independent when it comes to domestic policy, so its comments amounted to outrageous disregard for convention.
And such plaudits stood in stark contrast to the bleak assessment from the independent Institute for Fiscal Studies and the lukewarm endorsement from the Office for Budget Responsibility.
Money markets were also unimpressed. In the months since Sir Keir Starmer took office, the price of British government bonds, or gold-edged shares, has fallen precipitously and the interest rate charged on them last night rose to 4.43 per cent, a level that makes it the highest in the world. G7 club of rich Western nations.
Worryingly, the bond has a current rate similar to what it had at the time of the “Truss tantrum” two years ago.
The collapse of confidence in the pound and British government bonds that forced Liz Truss’s resignation as prime minister after just 49 days was in no small part the result of Janet Yellen and IMF officials’ rebuke of the then Foreign Minister Kwasi Kwarteng.
The contrast between the IMF’s ferocious attack on Truss and effusive praise for Reeves’ budget could not be starker. It raises serious questions about the integrity and neutrality of the Washington-based institution.
Historically, the IMF has a reputation for imposing strict budget discipline on its members. In 1976, he forced Jim Callaghan’s Labor government to make humiliating cuts to public spending, tighter monetary policy and higher interest rates in return for a loan.
But his usual criticisms of budget deficits, borrowing and debt have been totally ignored when it comes to Labour’s latest budget.
This may be because the IMF has become increasingly dominated by a European clique that appears to be fueling a long-term animosity against the United Kingdom – or at least the Conservative Party – for daring to leave the European Union.
Christine Lagarde, French managing director of the IMF at the time of the 2016 EU referendum, said Brexit would be “quite bad, or very bad” for Britain.
Meanwhile, the current managing director, Bulgarian economist Georgieva, was previously vice president of the EU and most of the IMF’s senior officials come from the continent.
The strength of the pro-Brussels contingent at the top levels of the Fund has tended to protect Europe’s faltering economies from the kind of direct intrusion suffered by the United Kingdom.
Reeves must be delighted to have received the IMF’s go-ahead for her first budget. But his surprise intervention has failed to calm nervous bond markets, placate the corporate sector or mitigate skepticism from Britain’s local watchdogs.
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