The Independent: Brown slams 'out of date' IMF analysis of UK economy: “He called for action to improve the functioning of the oil market and blamed a "lack of transparency and poor quality information" for adding to the volatility.”: “..in an oblique reference to recent problems at Shell, he said: "If there have been problems with companies reporting their reserves then it is important to recognise that there will be greater stability if we know more about reserves and plans to develop reserves." (ShellNews.net)

02 October 2004

By Philip Thornton Economics Correspondent in Washington

Gordon Brown launched an outspoken attack on the International Monetary Fund yesterday, dismissing its critical report on the UK economy as "out of date".

The Chancellor said its claims that Britain was facing a collapse in the property market and a crisis in the public finances were based on figures that were months old.

Earlier this week, the IMF, the world's leading financial watchdog, cut its forecast for UK growth next year further below Treasury predictions. It said mounting inflationary pressures would force the Bank of England to raise rates and warned potential housebuyers to exercise "particular caution".

It went on to warn the Chancellor he needed to tighten fiscal policy - cut spending, raise taxes, or charge for public services - to avoid breaking his golden rule governing the public finances.

In an unusually direct attack, Mr Brown said: "They are out of date on house prices because all the information is several months old. We have now seen figures showing changes since Easter and the spring."

He said that their worries over the public finances were out of date as it had not taken account of the July three-year spending review that confirmed spending growth in the coming years would be slower than the recent past.

"It may be that the IMF might want to look at this because their information is several months out of date," he told reports on the fringes of the annual IMF meeting in Washington. He also used the gathering to push a British proposal to reduce volatility in the oil markets, which he said presented the major risk to the current world economic recovery.

In a proposal issued ahead of the key meeting of G7 finance ministers, the Chancellor called for an increase in output, greater transparency in the oil market, higher investment by the oil industry and more effort to promote energy efficiency.

"High and volatile oil prices pose a risk to the outlook, dampening consumer spending and company profitability," he said. "If high prices persist, the consequences could become more serious, denting confidence and pushing up inflationary pressures."

The focus of his strategy was an appeal to Opec, the oil producers' cartel, saying that it needed to take "necessary action" to return oil prices to levels consistent with economic recovery. Opec has targeted a target range of $22 to $28 a barrel for several years but this week crude prices hit $50 - a record - on mounting fears of a shortage of energy supplies.

The initiative comes four months after Mr Brown used the last G7 meeting in New York to issue an appeal to Opec - when prices were below $40.

He defended the G7's record, saying the oil price had been driven up by higher-than-expected demand and political uncertainty in Iraq and the wider Middle East.

"We looking at the medium term," he said. "Oil has gone from $10 to $50 in the last few years and there are many factors behind this that we have to address."

He called for action to improve the functioning of the oil market and blamed a "lack of transparency and poor quality information" for adding to the volatility. "Not only must Opec increase the supply but also there has got to be greater transparency in the oil market and we must know more about the stocks available and the plans for developing supplies, and more about the plans in individual countries."

One Treasury source said that the UK document was sending a message to Opec to "open their books".

Mr Brown called for better information on reserves held by the oil majors and, in an oblique reference to recent problems at Shell, he said: "If there have been problems with companies reporting their reserves then it is important to recognise that there will be greater stability if we know more about reserves and plans to develop reserves."

He declined to comment on rumours the Government will delay the 1.9p a litre hike in fuel duty in next month's pre-Budget report.

Meanwhile, the Chancellor was working to build support for his proposals to relieve Third World poverty by making more resources available. He said he was "reasonably optimistic" he could get support for his plan to release funds by revaluing IMF gold.

He said he was "confident" he was building support for his proposed international finance facility that would use future government aid programmes to borrow from capital markets to fund immediate poverty relief.

http://news.independent.co.uk/business/news/story.jsp?story=568071