The International Monetary Fund has launched a scathing attack on Britain’s tax cut plan, calling on Liz Truss’ government to reconsider the plan to prevent further inequality.
In a rare public criticism of a major global economy, the Washington-based fund said the Kwasi-Kwarten mini-budget risks undermining the Bank of England’s efforts to tackle rampant inflation amid a cost-of-living emergency. Stated.
A statement planned by Kwarten on 23 November said it presented “an opportunity for the UK government to consider how to provide more targeted support and to reassess the tax system that particularly benefits high-income earners”. rice field.
The accusations come amid growing international backlash over the prime minister’s £45bn outstanding tax cut, prompt intervention from the IMF followed by sharp criticism late Tuesday from credit rating agency Moody’s. rice field. US Treasury Secretary Janet Yellen also said the US was “monitoring developments very closely” in Britain.
Moody’s, one of the most influential judges in the global financial markets that assesses the creditworthiness of governments and companies on behalf of large investors, said that the UK’s “massive tax cuts without money hurt creditworthiness.” It is negative,” he said.
“A persistent credit shock arising from market concerns about the credibility of the government’s fiscal strategy, which results in structurally high funding costs, could undermine the affordability of UK debt more permanently. ”
Intervention from the IMF is rare given the UK’s influence in the global economy and being one of the IMF’s largest shareholders.
Former US Treasury Secretary Larry Summers said warnings from the IMF were more common for emerging markets than countries like the UK. He told his BBC Newsnight:
Summers said early Tuesday that he was surprised the IMF had not intervened since Friday’s mini-budget.
The IMF has consistently warned countries to avoid universal bailouts in response to energy price shocks. It has argued that only the poorest households should be protected from the extra costs of higher energy rates and rising inflation in order to limit the impact on public borrowing.
Just days after Kwarteng’s mini-budget, and after the pound fell to an all-time low against the US dollar at some point on Monday, the organization is “closely monitoring the UK’s recent economic developments” and has been involved. said. with the authorities ”.
“Given the mounting inflationary pressures in many countries, including the United Kingdom, it is important that fiscal policy does not work in conflict with monetary policy, so large-scale, untargeted fiscal policy at this time is not recommended,” said a spokesperson. First public reaction.
Kwarteng has pledged to reduce the top tax rate from 45p to 40p and reduce the basic tax rate by 1p from next April. He has also kept corporate tax at his 19%, scrapped plans to raise it to 25%, and reversed the recent National Insurance premium hike, adding nearly £50bn to Britain’s mountain of debt. said.
The move sent the pound and government bonds sharply lower over the weekend and on Monday, but Kwarteng insisted the budget was aimed at economic growth.
Kwarteng said he would launch a medium-term debt reduction plan on November 23, calming markets, along with forecasts from the independent Office of Budget Responsibility about the ramp-up of government borrowing.
The Bank of England has also issued a notice of its readiness to raise interest rates to curb inflation. But most analysts expect the pound to continue to weaken and borrowing costs to rise unless the government cancels at least some of the planned tax cuts.
A Treasury spokesperson said:
“We are focused on growing the economy and raising living standards for all, and the Prime Minister has announced that he will release a medium-term fiscal plan on 23 November, which details the government’s fiscal rules. It determines the.”
https://www.theguardian.com/politics/2022/sep/27/kwasi-kwartengs-tax-cuts-likely-to-increase-inequality-imf-says IMF urges UK government to reconsider tax cut plan | Politics