Government tax-cutting measures are ‘likely to exacerbate the UK’s cost-of-living crisis’, the International Monetary Fund (IMF) has warned.
The IMF stated that tax measures announced by Chancellor Kwasi Kwarteng in the Mini Budget are likely to push up prices and increase inequality.
On 23 September, the Chancellor used the Mini Budget to announce tax cuts worth £45 billion. Amongst the measures unveiled was a reduction in the basic rate of income tax; the reversal of the 1.25% rise in national insurance contributions (NICs) that came in this year; and the scrapping of the planned rise in corporation tax to 25%.
The IMF stated that whilst it understands that the measures are intended to boost economic growth, it has concerns that the cuts could help to speed up the pace of inflation.
Commenting on the IMF’s warning, Lord Frost, Minister of State at the Cabinet Office, said: ‘The IMF has consistently advocated highly conventional economic policies. It is following this approach that has produced years of slow growth and weak productivity.
‘The only way forward for Britain is lower taxes, spending restraint, and significant economic reform.’