The I.m.f. Wants Another £400 Million Lopped Off Budget

The economics editor of the Sunday Times Business Review did us a service last Sunday when he explained in very comprehensive terms exactly what the International Monetary Fund wants from the Government, He explained: "Another £400 million in additional taxes .or reduced Government spending will have to be found next year because of our commitment to the IMF, This would be over and above the £400 million savings already announced in the devaluation package = withdrawal of SET premium and export rebate, defence spending and other promised cuts." (our emphasis) I.M.F. officials in Washington took a sceptical view of Roy Jenkins' claim that their were no conditions to the support for the pound. According ta Mr. Crawford: "There will be ‘constant surveillance'of the British economic situation by the I.N.F. so long as British drawings from the fund remain above $1,220 million, This scrutiny will begin next year. According to Washington sources, the I.M.F. will not wait for the Government's promised £200 million balance of payments surplus in the second half of next year, but will recommend tax increases or spending cuts wéll before then..." The I.M.F. officials have made it clear that what they are most concerned about is the level of the Government's internal expenditure: "The I.M.F. has extracted from the Government a commitment to cut its domestic borrowing rcquirement to £1,000,000 in the financial year 1968-69. This compares with the £1,400-£1,£00 million, which is expected now after allowing for the spending cuts already announced." (emphasis in the original) Po "Possible tax increases are already being studied by the British Governmenté« Officials are already pretty sure that further resources will have to be diverted away from home demand next year (irrespective of conditions to this effect imposed by the I.M.F.) though they are not yet sure how muche The most likely tax increase will take the form of applying purchase tax to items now exempt." As is well known, indirect taxation of this kind tends to hit the lower paid and poorer sections of the *ommunity more than others. The list of candidates for adding to the purchase tax list confirm this: "Detergents, washing powders, and bleaches..." Mr, Crawford alse expects "An increase in some rates of purchase tax..." A by-product of the Government having a ceiling of £1,000,000millicn to its domestic borrowing requirement is that long-term interest rates will increase. A major reason for this is that "the Government will have to sell gilt-edged stock heavily in the markets next year..." Thus, quite apart from the imposition of the 8% bank rate, the cost of housing, education, hospital building, etc. will all be pushed up/this policy. Not only will there be less money for these things, but the money will pay for less.