G20 nations give support to Osborne over tough Budget

A communiqu agreed by leaders of the world's major economies yesterday acknowledged that countries with large budget deficits, like the UK, need to "accelerate the pace of consolidation" and welcomed the announcement of plans by countries, including Britain, to get their finances under control.

United States President Barack Obama singled out Britain's Budget for praise for necessary and courageous action despite his pre-summit warning that over-hasty retrenchment risked tipping the world back into recession.

Yesterday's document set non-binding targets for member states to at least halve their deficits by 2013 and see debt stabilised or falling by 2016 – both of which Chancellor George Osborne said would be achieved by the measures in last week's emergency Budget.

"It is clear that consolidation will need to begin in advanced economies in 2011 and earlier for countries experiencing significant fiscal challenges," said the communiqu.

"There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth."

The final communiqu released at the end of the two-day summit in Toronto papered over cracks between the G20 states, accepting that different countries will pursue policies of continued fiscal stimulus or consolidation depending on their individual circumstances.

The G20 also backed proposals for "significantly higher" capital requirements on banks to enable them to withstand future shocks of the kind which triggered the recent crisis – with details to be fixed at the next summit in South Korean capital Seoul in November.

And it agreed the need for the financial sector to "make a fair and substantial contribution towards paying for any burdens associated with government interventions", while stopping short of endorsing a global bank levy of the kind sought by some campaigners.

Mr Osborne said Britain was "completely relaxed" about the G20's position that individual nations could adopt "a range of policy approaches" to ensure that the banks pay their share of the cost of the crisis. While the UK has announced its own bank levy, it has no wish to prescribe the same medicine to countries such as Canada which are resisting a global tax, he said.

"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," said the Chancellor.

"That language is reflected in the coalition agreement on which the British Government is formed. It has been delivered in the Budget we have presented earlier this week."

Yesterday's document recognises that it is appropriate for high-deficit states like Britain to undertake sharp fiscal consolidation programmes, while others like the US take a gentler path to balancing their books and those with surpluses, like China, take steps to boost domestic demand, said the Chancellor.

n More than 400 people were arrested after black-clad demonstrators broke away from a crowd of peaceful protesters at the summit in Toronto, setting fire to police vehicles and smashing windows with baseball bats and hammers.

Police used shields, clubs, tear gas and pepper spray to push back the protesters who tried to head south toward the security fence surrounding the perimeter of the G20 summit site. Several shop windows were shattered.