UK Investment Guides Loader

IMF warns UK government against further tax cuts

written by Bella Palmer

The warning from the IMF's chief economist came after the body pared its forecast for British economic growth next year as part of a broader forecast update

The International Monetary Fund warned Britain's Conservative government on Tuesday not to cut taxes in the run-up to a national election expected later this year, due to high levels of public debt and growing demands on services.

The warning from the IMF's chief economist, Pierre-Olivier Gourinchas, came after the body pared its forecast for British economic growth next year as part of a broader forecast update.

We would advise against further discretionary tax cuts, he said in response to a question from a reporter.

Gourinchas underlined growing demands for health and social care, education and environmental investment.

It is very important to have in place medium-term fiscal plans that accommodate these pressures, at the same time as ensuring that debt dynamics remain stable and contained, he added.

UK government debt soared as a share of national income during the COVID pandemic, although it remains lower than in the US, Japan or France.

Finance minister Jeremy Hunt cut payroll taxes and made permanent a tax break for business investment in November. Earlier on Tuesday said he would like to make further tax cuts in an annual budget statement due on March 6.

It is too early to know whether further reductions in tax will be affordable but we continue to believe that smart tax reductions can make a big difference in bolstering growth, Hunt said.

He has taken a more cautious approach to tax cuts than his predecessor Kwasi Kwarteng, whose unfunded plans under previous PM Liz Truss panicked bond investors, drew criticism from the International Monetary Fund and forced the BoE to prop up the government debt market.


The opinions expressed by our writers are their own and do not represent the views of UK Investment Guides. The information provided on UK Investment Guides is intended for informational purposes only. UK Investment Guides is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

Share this post with friends!