G20 ‘backs emergency Budget’
David Cameron and George Osborne claimed international approval for the emergency Budget after the G20 backed action to halve deficits by 2013.
Britain’s drastic spending cuts, which will see departmental budgets cut by 25% after the NHS and international aid are ringfenced, are at the more extreme end of the approaches being taken by the world’s largest and emerging economies.
But the G20 communique as the Toronto summit wrapped up supported the need for “consolidation” in advanced economies and for earlier than expected action “for countries experiencing significant fiscal challenges”.
Earlier US treasury secretary Tim Geithner had placed the emphasis on achieving growth through maintaining spending, before American diplomats adjusted their language in response to British pressure.
“I think the communique very explicitly recognises that countries in the G20 with serious fiscal challenges – and after all I am here representing the country with the largest deficit – need to accelerate the pace of consolidation,” Mr Osborne said.
Mr Cameron told the Commons the G20’s verdict had been “unequivocal”.
“For countries with large deficits the time to act is now. Britain has one of the largest deficits in the G20. And the summit specifically welcomed the plans set out in our Budget last week.”
The communiqué warned that “synchronised fiscal adjustment” across several major economies could prevent a recovery, hinting at concern that if a number of other states followed Britain’s actions the global economy could suffer.
But it then added: “There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth.
“Reflecting this balance, advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilise or reduce government debt-to-GDP ratios by 2016.”
The communiqué appeared to focus on Japan, rather than Britain, immediately after this passage, however. It singled out Tokyo’s fiscal consolidation plan for particular phrase.
“Fiscal consolidation plans will be credible, clearly communicated, differentiated to national circumstances, and focused on measures to foster economic growth,” the communiqué added.