Rachel Reeves was in her element at the annual meeting of the International Monetary Fund in Washington last week.
As she patrolled the corridors of the IMF’s HQ in a pale blue trouser suit, I watched as she was regularly stopped by central bankers and finance officials from across the globe, all keen to get selfies with Britain’s first female Chancellor.
At one point, she even posed against a balustrade on the balcony overlooking the capacious main hall as admirers, both male and female, took their snaps.
None of her recent Tory predecessors such as Jeremy Hunt or Philip Hammond attracted anything like 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 sight of the media, Reeves engaged in some discreet economic diplomacy with US treasury secretary Janet Yellen – her role model – and schmoozed the IMF’s managing director Kristalina Georgieva.
As one of the team accompanying the Chancellor explained, she was ‘rolling the pitch’, softening up the relevant people for the tax-raising measures to be announced in this week’s Budget.
And yesterday it all paid off. In a rare intervention, an IMF spokesman endorsed the Chancellor’s enormous £40billion tax hit saying it would boost growth ‘sustainably’ and observed that the new Budget rules showed the government was committed to bringing down the UK’s debts over the longer term.
The IMF’s uncharacteristically fulsome endorsement led the news bulletins on Radio 4’s flagship current affairs show Today, with the presenter announcing almost triumphantly: ‘The Chancellor Rachel Reeves has won the backing of the International Monetary Fund for yesterday’s Budget and its blockbuster increases in spending, taxation and borrowing.’
Not to be outdone, the BBC’s economics editor Faisal Islam described it as ‘helpful support to the Chancellor’.
Ms Reeves and Ms Yellen – her role model – at the annual meeting of the International Monetary Fund in Washington last week
Britain’s first female Chancellor patrolled the corridors of the IMF’s HQ in a pale blue trouser suit
As the global financial system’s economic enforcer, the IMF normally seeks to be studiously independent when it comes to domestic politics, so its comments amounted to an outrageous flouting of convention.
And such cheerleading was in stark contrast to the bleak assessment from the independent Institute for Fiscal Studies and a less than ringing endorsement by the Office for Budget Responsibility.
The money markets were also unimpressed. In the months since Sir Keir Starmer took office, the price of British government bonds, or gilt-edged stock, has dropped precipitately and the interest rate charged on them last night climbed to 4.43 per cent – a level which makes it the highest in the G7 club of rich Western nations.
Worryingly, the bond rate it now at a similar level to what it was at the time of the ‘Truss tantrum’ of two years ago.
The collapse in 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 measure the result of the dressing down handed out to the then chancellor Kwasi Kwarteng by Ms Yellen and IMF officials.
The contrast between the IMF’s savaging of Truss and the effusive praise for Reeves’s Budget could not be sharper. It raises serious questions about the integrity and neutrality of the Washington-based institution.
Historically, the IMF has a reputation for enforcing strict budgetary discipline on its members. In 1976, it forced Jim Callaghan’s Labour government into humiliating cuts in public spending, a tighter monetary policy and higher interest rates in return for a loan.
But its normal strictures about budget deficits, borrowing and debt have been totally ignored when it comes to the latest Labour budget.
This may be because the IMF has become increasingly dominated by a European clique which appears to nurture a long-term animus against the UK – or at least the Tory party – for daring to leave the European Union.
Christine Lagarde, the IMF’s French managing director at the time of the 2016 EU referendum, claimed that Brexit would be ‘pretty bad, to very bad’ for Britain.
Meanwhile, the current managing director, Bulgarian-born economist Ms Georgieva, previously served as vice-president of the EU and most of the IMF’s top officials hail from the Continent.
The strength of the Brussels-leaning contingent in the Fund’s upper echelons has tended to shield stumbling European economies from the kind of direct intrusion suffered by the UK.
Reeves must be delighted to have received the imprimatur of the IMF for her first Budget. But its surprise intervention has failed to reassure the jumpy bond markets, placate the business sector or blunten the scepticism of Britain’s home-grown watchdogs.
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