The International Monetary Fund (IMF) have issued a statement in response to the government’s Growth Plan. In an uncharacteristic move, the IMF have openly criticised the government’s plan to cut taxes, warning that the measure will in fact worsen the cost-of-living crisis and “increase inequality.”

The IMF, an agency of the United Nations (of which the U.K. is a member), plays a central role in the management of balance of payments difficulties and international financial crises. Through the research and analysis of global economic statistics, the IMF works to improve the economies of its member countries, promoting international monetary co-operation, international trade, high employment, exchange-rate stability, sustainable economic growth and making resources available to member countries in financial difficulty.

The IMF’s unexpected statement has critiqued the government’s plan to implement £45 billion of debt-funded tax cuts and has instead urged the government to use the fiscal budget, expected on 23^rd November, as a chance to re-evaluate their Growth Plan.

The statement reads in full:

“We are closely monitoring recent economic developments in the UK and are engaged with the authorities. We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures. However, given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy. Furthermore, the nature of the UK measures will likely increase inequality. The November 23 budget will present an early opportunity for the UK government to consider ways to provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high income earners.”

Following the statement, the Treasury have reassured the public that the November budget will provide further information on the government’s fiscal plans “including [how they will] ensur[e] that debt falls as a share of GDP in the medium term.” Contrastingly, Shadow Chancellor Rachel Reeves has stated that the IMF’s statement should have “set alarm bells ringing,” and has insisted that the government “urgently lay out how it will fix the problems it has created.”  The Bank of England has now stepped in after warning that if the market volatility continues there would be “material risk to UK financial stability.” In order to calm and restore markets, the Bank will start buying government bonds at an “urgent pace.” These purchases will be time limited and carried out on whatever necessary scale in order to ease investor concerns. This follows the Bank of England’s statement that it would not hesitate to hike interest rates to try and protect the pound and stem surging prices.

In a statement the Treasury commented:

“The government will continue to work closely with the Bank in support of its financial stability and inflation objectives.”

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