IMF sees risk that UK is knocked off course to fix public finances
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IMF sees risk that UK is knocked off course to fix public finances
The International Monetary Fund has called for more room to manoeuvre in the UK’s budget. The UK government is under pressure to meet its deficit reduction targets by the end of the year. The IMF has called on the UK government to make changes to its budget to allow more room for manoeuvre. It has also called for a review of the way the UK pays for its social security system.
In a final version of an annual report on Britain’s economy, the IMF said changes introduced by Reeves to the government’s deficit reduction plans had enhanced the credibility and effectiveness of fiscal policy.
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“Risks to this strategy must be carefully managed. In an uncertain global environment and with limited fiscal headroom, fiscal rules could easily be breached if growth disappoints or interest rate shocks materialize,” the IMF said.
The Fund also said the risk of overly-frequent changes to tax and spending policy could be reduced by changes including the creation of more fiscal room for manoeuvre by Reeves to meet her targets.
“The first best (option) would be to maintain more headroom under the rules, so that small changes in the outlook do not compromise assessments of rule compliance,” it said.
In response to the report, Reeves said in a statement that the Fund had backed her choices for Britain’s economy to recover and that her plans would “tackle the deep-rooted economic challenges that we inherited in the face of global headwinds.”
Reeves is under pressure to raise taxes later this year to remain on course to meet her budget targets, having already increased social security contributions paid by employers and along with revenue-raising measures in late 2024.
Writing by William Schomberg, editing by William James
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