IMF hands Healey a Budget boost - now he must heed its call to tackle debt, says ALEX BRUMMER

Few British Chancellors have received such a garlanded arrival at the IMF as John Healey. He may prove to be a minimalist Chancellor at the upcoming Budget.

But repeated endorsement of Britain’s fiscal discipline, ahead of October 28, together with better-than-forecast growth this year has brought rare praise from the fund’s managing director, Kristalina Georgieva.

She added the standard admonition that the UK must stick to the course.

Rachel Reeves’ £75billion of tax-raising Budgets may have injured and angered great British businesses such as Marks & Spencer and led to a surge in unemployment among the nation’s young people. But they have satisfied economic purists.

There is nothing the International Monetary Fund likes more than a fiscal plan.

Yet critical Labour spending decisions remain in abeyance, and the UK will have more debt at the end of this Parliament than at the beginning. But, in contrast to France, there are fiscal rules.

Georgieva is demanding that Paris gets its act together and passes a budget.

The rules make the task of Chancellor even more difficult. Healey, as Defence Secretary, advocated more military spending and resigned after predecessor Rachel Reeves declined to fund £28billion of outlays in the Defence Investment Plan.

Now the IMF has intervened. It notes that Britain and other Western democracies have guns-and-butter choices to make. Freedom can be defended by military, not welfare, expenditure.

AI and cyber risks are the great theme in Bangkok. Advanced country debt – at over 100 per cent of national output in most of the G7 (bar Germany) – is a close second.

Both the IMF’s fiscal chief, Rodrigo Valdes, and Georgieva are demanding ‘urgent’ action. They make an obvious and pertinent point for Britain. 

The bigger the debt pile, the greater the interest rate costs and the more potent the doom loop.

Georgieva offered an insight into why Britain pays more for its ten-year and 30-year borrowing than the rest of the G7.

The City of London pays a price for being at the heart of capitalism. The deepest wholesale, derivative and foreign exchange markets in Europe are based in the UK, as are many of the European and global offices of the smartest players such as hedge funds Citadel and Apollo and investment bankers Goldman Sachs.

The UK is constantly in the crosshairs.

Every political twist provides a trading opportunity. Nevertheless, if Britain had a Government willing to set about a bloated welfare budget, as the Tories are proposing, then the cost of financing the national debt could be reduced.

British Chancellors have come to IMF meetings with big ideas. John Major’s terrible decision to join the Exchange Rate Mechanism was unveiled at the IMF.

Gordon Brown’s debt relief plans for poor countries were authored at the meetings. So were Reeves’ fiscal rules. Healey has big, not necessarily smart, shoes to fill.

Wrong platforms

Andrew Bailey rarely gets rave reviews for monetary policy. He was Governor when inflation, post-Covid-19 and Russia’s war on Ukraine, soared to 11.1 per cent in October 2022.

His work for the Bank of England on artificial intelligence’s financial risks has proved more sure-footed.

At a panel on building fraud-resistant financial services, Bailey demanded that the authorities fight fire with fire.

He was fiercely critical of big-tech platforms which have become the great distributors of financial fraud, with more than 70 per cent of people targeted online.

And he contrasted undisciplined digital platforms with newspapers where every word written about finance and business advertising is strictly regulated.

Bringing unruly, arrogant online platforms to heel is all but impossible. Fines for wrongdoing are regarded as a cost of doing business.

French lessons

Why has the IMF suddenly started making nice to Britain after two decades of coolness?

One reason could be the arrival as chief economist of British-Argentinian and former Monetary Policy Committee member Silvana Tenreyro, after several French incumbents since Brexit.

Paris is now in the naughty chair.