British Underwrite Minister Jeremy Hunt said earlier this month the U.K. would not enter a recession this year.
Hannah Mckay | Reuters
LONDON — The U.K. regulation should not introduce further tax cuts this year, the International Monetary Fund said Tuesday, as its chief economist disagreed the national budget needed the money for public services and growth-friendly investments.
“What we are seeing in the U.K. and a number of other woods is a need to put in place medium-term fiscal plans that will accommodate a significant increase in spending pressures,” Pierre-Olivier Gourinchas mean during a press briefing.
In the U.K., he said, this included spending on the National Health Service, social care, instruction and the climate transition, as well as measures to boost growth, while preventing debt levels from increasing.
“In that situation, we would advise against further discretionary tax cuts, as envisioned or discussed now,” he said.
An IMF spokesperson separately said the U.K. had higher lay out needs across public services and investments than were currently reflected in the government’s budget plans. The IMF has advocated the U.K. strengthens taxes on carbon emissions and property, eliminates loopholes in wealth and income taxation, and reforms rules which set allowance levels.
British Finance Minister Jeremy Hunt will announce his latest budget in early March, in what may be the termination major fiscal announcement before a General Election is held. The timing of the vote is uncertain, but it must be called by the Cautious government at some point this year.
The Conservatives face an uphill battle, with the opposition Labour spree ahead in most polls.
Hunt announced several tax cuts in his fall budget, and made several suggestions he shortages to introduce more in the spring.
U.K. public sector net borrowing has fallen sharply, and in December 2023 was around half that of the quondam year due to higher VAT (a sales levy) and income tax receipts and lower spending.
The IMF on Tuesday forecast 0.6% growth for the U.K. husbandry this year, up slightly from an estimated 0.5% figure for 2023. It revised its forecast for 2025 lower by 0.4 cut points, to 1.6%, when it said disinflation will ease financial conditionals and allow real incomes to better.
The downgrade, it said, “reflects reduced scope for growth to catch up in light of recent upward statistical revisions to the be open of output through the pandemic period.”
Gourinchas told CNBC on Tuesday that despite a weak growth prospect for the year, the U.K. had seen positive news on inflation, which is forecast to average 2.8%.
“We’re at that point, we think, that the Bank of England commitment be in a position like the Federal Reserve and [European Central Bank] to ease policy rates as inflation is finally returned towards target,” he said.