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Britain, the US and China to feature on checklist of countries that pose a risk to the world economy
George Osborne's deficit plan will come under regular scrutiny by the International Monetary Fund under plans drawn up to prevent systemically important countries triggering another financial crisis.
Britain faces the prospect of criticism by the Washington-based agency under an agreement for a checklist of nations that pose a risk to the world economy.
The chancellor said the country's high public and household debts and the need to repair the finances of government-owned banks put it in the front line of countries due to be singled out by the IMF, though he welcomed the plan saying he was sure it would give the government's austerity measures a clean bill of health.
The IMF outlined plans in a communique tonight to monitor seven countries – including the US, China, France, Japan and Germany – which it said were on the list because of the size of their economies.
Osborne said: "I fully expect Britain to be chosen given its high levels of government and private debt. The UK will be able to demonstrate that yes, it has a problem, but it has a credible solution."
China, while has agreed in principle to the plan, is expected to be more reticent about IMF officials turning up in Beijing to examine the communist government's budgets and spending plans.
Reviews are expected to focus on major shifts in policy rather than micro measures, such as welfare spending or regulation, though many countries fear IMF officials will succumb to meddling in member country's internal affairs.
The IMF recently criticised the US for its failure to agree cuts to its growing government debt. The document is credited with playing a key role in convincing the Obama administration to ditch its growth strategy in favour of deep reductions in spending.
Osborne said the debate inside Capitol Hill and the White House had shifted in recent months and put Britain in the mainstream of deficit reduction plans across the major economies.
He argued Labour, and its spokesman Ed Balls, was out of step following the shadow chancellor's insistence that front-loaded cuts were too deep. "Labour is now isolated in arguing for a slower pace of deficit reduction," he said.
President Barack Obama has put forward a plan to cut 8% of GDP by 2015/16, which is a similar target to Osborne's. Labour said the US plan differed because the administration waited until strong growth was under way before considering cuts, unlike Britain where the economy has contracted after being hit by early cuts.
Balls said: "George Osborne is once again playing fast and loose with international comparisons to score political points. As the IMF's report made clear only this week George Osborne is going much further and faster than any other major economy in the world. He is the one who is isolated.
"He is also forgetting that by taking a steadier approach to secure the US recovery President Obama now has a growing economy and falling unemployment which is crucial to getting the deficit down. But in Britain, by cutting too deep and too fast, George Osborne has delivered slow growth and higher unemployment, which is why he will now have to borrow £46bn more than he planned."