IMF urges UK government to reconsider tax-cutting plans
The International Monetary Fund has launched a stinging attack on the UK’s tax-cutting plans and called on Liz Truss’s government to reconsider them to prevent stoking inequality.
In rare public criticism of a leading global economy, the Washington-based fund said Kwasi Kwarteng’s mini-budget risked undermining the efforts of the Bank of England to tackle rampant inflation amid the cost of living emergency.
It said a statement planned by Kwarteng for 23 November presented an “opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high income earners”.
The rebuke comes amid a growing international backlash over the chancellor’s £45bn of unfunded tax cuts, with the intervention from the IMF swiftly followed by sharp criticism from the credit rating agency Moody’s late on Tuesday. The US treasury secretary, Janet Yellen, also said the US was “monitoring developments very closely” in the UK.
As one of the most influential adjudicators in global financial markets, which rates the creditworthiness of governments and corporations on behalf of large investors, Moody’s said the UK’s “large unfunded tax cuts are credit negative”.
“A sustained confidence shock arising from market concerns over the credibility of the government’s fiscal strategy that resulted in structurally higher funding costs could more permanently weaken the UK’s debt affordability.”
The intervention from the IMF is rare given the influence of the UK in the global economy, and as one of the organisation’s largest shareholders.
Larry Summers, the former US treasury secretary, said such a warning shot from the IMF would be more usual for an emerging market economy than a
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