Page last updated at 19:28 GMT, Wednesday, 21 April 2010 20:28 UK

Election: IMF clash between Darling, Osborne and Cable

Vince Cable, George Osborne and Alistair Darling on Clarke's IMF comments

Alistair Darling, George Osborne and Vince Cable have clashed over whether a hung parliament could be harmful for the UK economy.

Mr Osborne said fellow Tory Ken Clarke was right to warn that it could result in the International Monetary Fund having to step in to bail out the UK.

Speaking in the BBC's Daily Politics Chancellors Debate, Mr Osborne said Mr Clarke made a "statement of fact".

Mr Darling said it was "desperate stuff" from the Conservatives.

Mr Cable said the Tories were "scaremongering" as the three men all attacked their counterparts' plans for the economy.

In other news:

• Lib Dem leader Nick Clegg said Prime Minister Gordon Brown was a "desperate politician"

• David Cameron was struck by an egg thrown by a student while campaigning in Cornwall

• The British National Party called for restrictions on imports from China .

• The final list of nominations for the general election are published, showing a total of 4,149 candidates are battling for 650 Commons seats.

Ken Clarke, the shadow business secretary, said earlier on Wednesday that the political instability caused by an indecisive election result could hamper efforts to tackle the UK's huge public deficit.

He raised the spectre of a repeat of the late 1970s, when the government had to get an emergency loan from the International Monetary Fund.

Mr Clarke said the failure of the Labour government to deal with a crisis in the public finances in the 1970s was partly due to its lack of a big Commons majority which forced it to rely on the Liberals in the Lib/Lab pact - a state of affairs which he said was a "farce and fiasco".

Continuing dispute

The BBC's Laura Kuenssberg said Mr Clarke's comments were very strong and seemingly designed to jog the memory of older voters. However, she said they reflected the real uncertainty caused by the state of the polls and how the parties should respond to them.

Mr Osborne said Mr Clarke was simply saying that the confidence of the financial markets could be badly affected by a hung Parliament.

Nick Robinson
What was most memorable was the fact that the whole course of this debate was set by the rise of the Lib Dems
Nick Robinson
BBC political editor

"We have got to be aware in this country of the consequences of political instability… and what that could mean for economic stability in Britain," he said.

Mr Cable said it was incorrect to suggest that a hung Parliament would result in political instability, saying instead that it would be better for the economy if politicians co-operated more.

"They [the Tories] are losing the election and they are starting to panic," he added.

Mr Darling said the Tories have "no credible plans, that is what makes markets roll their eyes".

The three would-be chancellors in the next government also used the debate to revisit their continuing dispute over the Conservatives' plan to find an additional £6bn of public sector savings in the current financial year as a means to avoid most of Labour's planned 1% rise in National Insurance from April 2010.

While the Tories say it is essential to start to trim the public deficit, Labour says the proposed "cuts" risk derailing the continuing economic recovery.

"Our first task is to secure the recovery, take away support too soon… would put at risk the economy," said Mr Darling.

Mr Osborne countered that the next government had to start to tackle the public deficit straight away, and that the extra £6bn of savings would prevent the need for Labour's National Insurance rise, which he again called a "jobs tax".

Mr Cable said the Lib Dems were being open and honest about the need for public sector spending cuts, adding that the party would reduce the income tax payments of low and middle earners.

Difficult questions

The three men hoping to be chancellor after the election were pressed with questions from Daily Politics presenter Andrew Neil and BBC economics editor Stephanie Flanders.

Mr Cable denied that the Lib Dems lacked proposals to sort out the financial crisis, saying they had "specific policies to deal with the problems that were raised".

Mr Osborne had to defend why he had not ruled out a rise in VAT.

"I will do everything I can to make sure that we get the effort done through public spending restraint, and I'm pretty confident we can do that, so that's why I say we have got no plans to increase VAT."

Meanwhile Mr Darling was tasked with admitting that Gordon Brown had been wrong to say for many years that the UK had ended the cycle of boom and bust.

"There are always going to be economic cycles," replied the chancellor.

"But what I would say is that when Gordon Brown was chancellor we had the longest period of uninterrupted growth this country had ever seen."

Tax avoidance claim

Lib Dem plans to reduce the income tax of low and middle earners also came under further scrutiny during the debate.

Under the party's proposal, no income tax would be paid on the first £10,000 earned by these groups.

This policy will cost an estimated £17bn, which the Lib Dems say can be paid for by closing "tax loopholes that unfairly benefit the wealthy and polluters".

Both Labour and the Tories say this is unachievable, and Mr Osborne used the debate to quote from a letter written by a former senior civil servant who backs up this claim.

The Conservatives subsequently released the full letter from Chris Tailby, who was director of HM Revenue & Customs' anti-avoidance group from 2004-2009.

"Savings from closing tax avoidance loopholes are likely to produce rather less tax than Nick Clegg's Liberal Democrats suggest," wrote Mr Tailby.

"If there were a simple solution to the tax avoidance problem one would have been found over the last few years."



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