LONDON – England – Further IMF scaremongering from Christine Lagarde is firmly debunked.
- The Government is planning to circumvent purdah rules by using the IMF, which is funded by the EU and the UK Government.
- The IMF has been consistently wrong about its forecasts for the UK economy. It is wrong now. The Chancellor has castigated the IMF for its errors in the past.
- The IMF recommends tax hikes on items such as food and childrens’ clothing if we vote ‘IN’.
- Most of the IMF’s specific claims are contradicted by pro-EU campaigners, such as the Government and the Bank of England.
- The European Commission and Parliament are planning to take the UK’s seat on the IMF if we vote to stay.
- Christine Lagarde is facing serious criminal allegations.
Responding to the IMF’s assessment of the UK economy, Priti Patel MP said:
‘The IMF warned Britain it was playing with fire when it set out a plan to deal with the deficit. Now our economy is stronger than nearly every other major economy. Today, the IMF is talking down Britain because we want to take back control from Brussels. They were wrong then and they are wrong now.
‘The EU-funded IMF should not interfere in our democratic debate a week before polling day. It appears the Chancellor is cashing in favours to Ms Lagarde in order to encourage the IMF to bully the British people – it is a sign of the desperation in the IN campaign.’
The IMF has announced that it plans to intervene in the purdah period. The IMF is not ‘independent’, but is funded by the EU. Lagarde is an employee of Osborne.
In her remarks to journalists this morning, Christine Lagarde confirmed that the IMF would release a report warning against a leave vote one week before the referendum.
This will be during the 28 day ‘purdah‘ period which prohibits public authorities from publishing information pertaining to the referendum. The purpose of the rules is to stop taxpayers’ money being spent on campaigning.
The IMF is taxpayer funded but has nevertheless made clear its intent to interfere in the debate. According to the Commission’s own transparency system, the IMF has received €168,138 from the European Commission since 2007.
George Osborne is one of the voting members of the IMF Board of Governors and has 203,004 votes.
Christine Lagarde is a long-standing pro-EU campaigner, who believes the law should not be followed when it is inconvenient.
Ms Lagarde has said ‘we would like to see the euro zone be much more integrated‘.
She has argued that the law should be violated to further political ends, stating: ‘We violated all the rules because we wanted to close ranks and really rescue the euro zone. The Treaty of Lisbon was very straight-forward. No bailout’.
She is a noted supporter of greater European integration with her proposals dubbed as steps ‘towards a United States of Europe‘.
She has said that uncontrolled immigration in the Schengen area has ‘upside potential’.
Christine Lagarde is facing serious criminal allegations.
Christine Lagarde has been charged with negligence by a French court over her alleged role in the payment of £293 million to a French businessman, Bernard Tapie. The French Republic has since ordered Mr Tapie to repay the money.
If convicted, Ms Lagarde could face up to a year’s imprisonment. The case continues.
The IMF recommends tax hikes if we vote ‘IN’.
The IMF recommends ‘measures such as scaling back distortionary tax expenditures (e.g., nonstandard VAT rates), which would also increase economic efficiency and tax neutrality.’
This could mean the imposition of VAT on food, books and childrens’ clothing, a massive tax hike for working families. In January this year, the Economics Commissioner, Pierre Moscovici, called for further harmonisation of taxation, including scrapping the UK’s zero rates, stating a ‘zero rate is not the best idea’.
The IMF has been consistently wrong about its forecasts for the UK economy. It is wrong now.
The IMF has tried to talk Britain’s economy down before – but its negative forecasts for the UK economy have been consistently wrong. In 2013 the IMF’s chief economist, Olivier Blanchard, warned that Britain’s growth prospects were very low. When challenged, the Chief Economist responded: ‘I am right and they are wrong’. His estimates turned out to be inaccurate and UK growth was much stronger than he predicted.
The IMF later had to accept that it was wrong about its warnings for the UK. Christine Lagarde later admitted that she had ‘underestimated‘ the strength of growth when the IMF assessed the UK economy in 2013.
The IMF has made other major errors of forecasting. In June 2013, the IMF was forced to admit it had issued ‘economic projections that were too optimistic’ about its joint austerity programme with the EU in Greece.
Even the Head of the IN campaign has dismissed siren voices like the IMF’s. The Chairman of the IN campaign, Lord Rose of Monewden, has admitted that there are no short-term risks in voting to leave, stating: ‘Nothing is going to happen if we come out of Europe in the first five years … There will be absolutely no change … It’s not going to be a step change or somebody’s going to turn the lights out and we’re all suddenly going to find that we can’t go to France, it’s going to be a gentle process’.
The Chancellor of the Exchequer has previously been very critical of the IMF.
In April 2014, the Chancellor made a speech to the American Enterprise Institute which was widely perceived to be a direct attack on the IMF for its previous negative forecasts about the British economy. Mr Osborne said: ‘pessimistic predictions that fiscal consolidation was incompatible with economic recovery have been proved comprehensively wrong by events… many of those same pessimists have now found new grounds to be gloomy about our future… I want to explain why I believe both of these predictions will be proved wrong too… I have a different prescription. My message today at the IMF is this. The pessimists said our plan would not deliver economic growth. Now they say economic growth will not deliver higher living standards. They were wrong about the past and they are now wrong about the future‘.
The IMF is wrong about the effect of leaving the EU on the current account. This undermines all its subsequent predictions about the impact of a vote to leave the EU.
The IMF argues that it would be more difficult to finance the current account deficit in the event of a vote to leave the EU. The UK recorded a current account deficit of £96.3 billion in 2015.
The current account deficit could be substantially reduced if we Vote Leave. In 2014 (the last year for which data are available) the UK recorded a £12.3 billion balance of payments deficit with the EU institutions. ONS figures released in March 2015 show the UK Government paid the EU institutions (net) £10.6 billion in 2015 (this figure excludes payments by the private sector to the EU institutions).
This means we could substantially cut the current account deficit if we Vote Leave.
The EU-funded Oxford Economics group has concluded that if the UK voted to leave the EU, ‘in most cases (five out of nine), the UK’s trade balance improves’.
The IMF is wrong that the prospect of leaving the EU ‘already appears to be having an impact on investment and hiring decisions’.
The Bank of England stated yesterday that ‘interest rates appear to have moved little in response to referendum-related news‘ and that there is an ‘absence of a clear effect on interest rates… The impact of the referendum on equity prices is also difficult to quantify’ and that there is nothing to ‘suggest any clear referendum impact’.
The IMF even attributes recent trends in the commercial real estate market to the EU referendum. This is despite the Monetary Policy Committee of the Bank of England’s admission yesterday that it was ‘unclear‘ to what extent property transactions were being affected by the referendum.
The Bank of England has said there is: ‘little evidence across the range of indicators that… uncertainty surrounding the outcome of the referendum on the UK’s membership of the EU had much affected job creation’.
The IMF’s claim that the largest risk to the economy is the EU referendum is contradicted by the Bank of England.
The Governor of the Bank of England has said that ‘the global risks, including from China are bigger than the domestic risk [of the referendum]’.
The IMF is wrong about house prices.
The IMF is wrong to claim that leaving the EU ‘could entail sharp drops in equity and house prices’.
Philip Shaw, Chief Economist at Investec Bank, has said: ‘I don’t necessarily see a massive impact on house prices. In the UK domestic property market, the biggest driver is demographics and regulation‘. He has also claimed interest rates could be cut, stating that ‘is a risk’.
The Council of Mortgage Lenders has said: ‘As a relatively small, open economy and a major financial centre, the UK has, and will continue to have, close links with global economies, including those within the EU. There is no simple answer to the question of how Brexit might affect housing and mortgage markets’.
The Government has said the IMF is wrong that ‘ratification of a new deal would require unanimous consent of all EU member governments’.
A withdrawal agreement under article 50 of the Treaty on European Union (TEU) is subject to qualified majority voting, not unanimity in the EU Council.
As the Government has acknowledged, ‘The final agreement would need to be agreed by both parties: the EU side and the departing Member State. On the EU side, this would require an enhanced qualified majority among the remaining Member States. This means that no single Member State could veto the deal‘.
Even if a separate deal to the withdrawal agreement were required (a point on which there is some legal uncertainty), the Government has admitted that: ‘an agreement focused solely on trade would need to be approved by the European Parliament and a qualified majority of the Council’.
The IMF is wrong about the future nature of the UK’s relationship with the EU – as the IN campaign has acknowledged.
The IMF claims that a ‘vote to leave the EU would create uncertainty about the nature of the UK’s long-term economic relationship with the EU and the rest of the world’. This is wrong.
The Prime Minister, David Cameron, has admitted: ‘If we were outside the EU altogether, we’d still be trading with all these European countries, of course we would … Of course the trading would go on … There’s a lot of scaremongering on all sides of this debate. Of course the trading would go on’.
The UK’s former Ambassador to the EU and leading supporter of the BSE campaign, Lord Kerr of Kinlochard, has admitted: ‘there is no doubt that the UK could secure a free trade agreement with the EU. That is not an issue‘.
Even the pro-EU CBI has said: ‘the UK is highly likely to secure a Free Trade Agreement with the EU, and such an agreement would be likely to be negotiated at an extremely high level of ambition relative to other FTAs [free trade agreements]’.
The pro-EU Centre for European Reform has accepted that, ‘given the importance of the UK market to the eurozone, the UK would probably have little difficulty in negotiating an FTA‘.
The Foreign Secretary, Philip Hammond, has admitted that a free trade agreement in goods ‘would be relatively simple to negotiate‘.
The IMF is wrong that London’s status as a global financial centre could be ‘eroded’ due to a loss of passporting rights.
Switzerland exports a higher proportion of financial services to the EU, despite an absence of passporting rights for its banks. The OECD has noted that: ‘the EU absorbs around 45% of Swiss exports of financial services, despite the absence of passporting rights for its banks‘. In 2014, exports to the EU of financial services, insurance and pensions represented 33% of the UK’s exports in those sectors.
Mutual recognition agreements could be agreed if we Vote Leave. The Government has admitted: ‘the EU has “equivalence regimes” to allow financial services firms outside the EU to trade with the Single Market in a way that is similar to the EU financial services passport. It does this through assessing whether a country’s regulatory regime is equivalent to EU rules in the area’. The EU-Canada free trade agreement contains a chapter on financial services.
It is in the EU’s interests to continue to secure access to the world’s largest capital market. As the Governor of the Bank of England, Dr Mark Carney, has said: ‘The comment I would make is that mutual recognition arrangements are possible to achieve‘. There is no prospect of EU Governments wanting to restrict the access of their banks to the City of London.
As the Chairman of the IN/BSE campaign, Lord Rose of Monewden has said: ‘We are very good at what we do in terms of financial services. They cannot do without us‘. It will be in the interests of EU negotiators for the UK to retain ‘passporting’ rights, as key European firms ‘passport’ their services into London.
According to the Bank of England, in September 2015, 75 banks located in the European Economic Area ‘passported’ their services into the UK, including ABN AMRO, BNP Paribas, Deutsche Bank and Société Générale. In addition, almost 800 insurance firms in the EEA could passport their services into the UK as of July 2015.
The European Commission has already announced it intends to silence the UK’s voice in the IMF.
The EU’s blueprint for further integration and future Treaty change, the Five Presidents’ Report, calls for common EU representation ‘in the international financial institutions’ rather than letting individual member states speak for themselves. It suggests that the EU’s ‘fragmented voice means the EU is punching below its political and economic weight’ and specifically singles out the IMF as one such example.
In October 2015, the European Commission proposed a Council Decision to establish unified representation of the euro area in the IMF. The draft Decision, on which the UK will not have a vote, states that: ‘Close cooperation with non-euro area Member States shall be organised within the Council and the [Economic and Financial Committee], on matters related to the IMF. Common positions shall be coordinated on matters relevant for the European Union as a whole’.
The European Parliament has voted for the UK to be silenced in the IMF last month.
In April, the European Parliament called for the EU to ‘seek full membership of international economic and financial institutions where this has not yet been granted and is appropriate (e.g. in the cases of the OECD and the IMF)’.
The Parliament demanded that there should be ‘a single European Union constituency in the long term’, with voting in the EU Council ‘moving away from consensus to a weighted majority voting system‘.
The European Court will force this through.
In an October 2014 decision, the European Court ruled, rejecting the UK’s arguments, that the EU may require the UK to adopt a common EU position in an international organisation of which the EU is not a member, provided that the subject matter of the decision relates to an EU legislative competence. As a result, the UK was forced to adopt an EU common position in International Organisation of Vine and Wine.
Since the EU has legislative competence over financial services, the UK could be forced to adopt a common EU line in the IMF whenever the EU wants.