Current:Home > FinanceBritain’s Conservative government warned against tax cuts by IMF economist -Prime Money Path
Britain’s Conservative government warned against tax cuts by IMF economist
View
Date:2025-04-13 00:06:21
LONDON (AP) — The International Monetary Fund’s chief economist has advised the U.K. government to avoid further tax cuts amid expectations Prime Minister Rishi Sunak’s battered administration will do just that to win over voters in an election year.
Instead of reducing taxes, the government should ensure it is prepared to meet increasing demands for spending on the National Health Service, social care and education as Britain faces sluggish economic growth and the lingering effects of high inflation, Pierre-Olivier Gourinchas told reporters after the IMF released its latest outlook for the world economy.
U.K. Treasury chief Jeremy Hunt is widely expected to cut taxes in the coming months as part of an effort to boost support for his Conservative Party, which trails badly in most opinion polls. The next general election must be held by Jan. 28, 2025, and is expected to take place this year.
But Gourinchas said cutting taxes would be a mistake. Britain needs to make sure its finances are strong enough to accommodate increased spending demands without increasing debt as a proportion of economic output, he said.
“In that context, we would advise against further discretionary tax cuts as envisioned and discussed now,” Gourinchas said.
His comments came after the IMF downgraded its outlook for the U.K. economy, forecasting growth of 0.6% this year and 1.6% in 2025. In October, the IMF forecast that the U.K.’s gross domestic product would grow 2% in 2025.
Hunt is focusing on longer-term projections, noting that the IMF expects growth to strengthen over the next few years.
“It is too early to know whether further reductions in tax will be affordable in the budget, but we continue to believe that smart tax reductions can make a big difference in boosting growth,” he said.
Concerns about responsible fiscal policies are especially sensitive for Sunak and Hunt as they came to power after their predecessors were widely criticized for announcing millions of pounds in tax cuts without saying how they would be paid for.
Former Prime Minister Liz Truss was forced to resign after less than two months in office when concern about her policies sent the pound tumbling to an all-time low against the U.S. dollar and forced the Bank of England to intervene in bond markets to protect pension funds.
veryGood! (15)
Related
- Which apps offer encrypted messaging? How to switch and what to know after feds’ warning
- New York Climate Activists Urge Gov. Hochul to Sign ‘Superfund’ Bill
- Is that Cillian Murphy as a zombie in the '28 Years Later' trailer?
- Rams vs. 49ers highlights: LA wins rainy defensive struggle in key divisional game
- Charges tied to China weigh on GM in Q4, but profit and revenue top expectations
- Morgan Wallen sentenced after pleading guilty in Nashville chair
- Wisconsin kayaker who faked his death and fled to Eastern Europe is in custody, online records show
- Social media platform Bluesky nearing 25 million users in continued post
- The FTC says 'gamified' online job scams by WhatsApp and text on the rise. What to know.
- Gas prices set to hit the lowest they've been since 2021, AAA says
Ranking
- Nearly 400 USAID contract employees laid off in wake of Trump's 'stop work' order
- Trump names Andrew Ferguson as head of Federal Trade Commission to replace Lina Khan
- Mitt Romney’s Senate exit may create a vacuum of vocal, conservative Trump critics
- 'Yellowstone' Season 5, Part 2: Here's when the final episode comes out and how to watch
- Federal appeals court upholds $14.25 million fine against Exxon for pollution in Texas
- TikTok asks Supreme Court to review ban legislation, content creators react: What to know
- McConnell absent from Senate on Thursday as he recovers from fall in Capitol
- Is that Cillian Murphy as a zombie in the '28 Years Later' trailer?
Recommendation
'Squid Game' without subtitles? Duolingo, Netflix encourage fans to learn Korean
Arctic Tundra Shifts to Source of Climate Pollution, According to New Report Card
Morgan Wallen's Chair Throwing Case Heading to Criminal Court
Neanderthals likely began 'mixing' with modern humans later than previously thought
NHL in ASL returns, delivering American Sign Language analysis for Deaf community at Winter Classic
US inflation likely edged up last month, though not enough to deter another Fed rate cut
Cincinnati Bengals quarterback Joe Burrow owns a $3 million Batmobile Tumbler
In a First, Arizona’s Attorney General Sues an Industrial Farm Over Its Water Use