London Daily

Focus on the big picture.
Monday, Feb 02, 2026

IMF sounds alarm on UK tax cut plans

IMF sounds alarm on UK tax cut plans

The International Monetary Fund has openly criticised the UK government over its plan for tax cuts, warning that the measures are likely to fuel the cost-of-living crisis.

In an unusually outspoken statement, the IMF said the proposal would be likely to increase inequality and add to pressures pushing up prices.

Markets have already raised alarm over the plans, sending the pound plunging.

The government says the measures will kickstart economic growth.

Chancellor Kwasi Kwarteng unveiled the country's biggest tax package in 50 years on Friday. The £45bn cut will be funded by government borrowing.

The IMF works to stabilise the global economy, and one of its roles is to act as an early economic warning system.

It said it understood the package aimed to boost growth via tax cuts, but it warned that the measures could speed up the pace of price rises, which the UK's central bank is trying to bring down.

"Furthermore, the nature of the UK measures will likely increase inequality," it said.

The IMF said that the government publishing a fiscal plan on 23 November gave it an opportunity to "re-evaluate" tax measures, "especially those that benefit high income earners".

The UK government proposals would scrap the top rate of income tax, and end a cap on bankers' bonuses, among other measures.

The announcement on Friday sparked days of financial turmoil, as investors dumped the pound and UK debt. On Monday the pound fell to record lows against the dollar.

Some of the country's biggest lenders suspended mortgage deals amid the uncertainty.

The Treasury said: "We are focused on growing the economy to raise living standards for everyone."

It added that Mr Kwarteng was due to publish his medium-term plan for the economy on 23 November, which would include ensuring that UK debt falls as a share of economic output in the medium term.

Meanwhile, Lord Frost, the former Brexit minister and close ally of Prime Minister Liz Truss, criticised the IMF's statement.

He told the Daily Telegraph: "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."

BBC economics editor Faisal Islam says the IMF's "stinging rebuke... reflected similar concerns from the world's major finance ministries that a crisis brewing in the UK could spill over into a global slowdown".

On Tuesday, the Bank of England signalled that it was prepared to ramp up interest rates in response to the slump in the value of the pound.

Its chief economist Huw Pill said the Bank "cannot be indifferent" to the developments of the past days.

He said the Bank would have to deliver a "significant monetary policy response" to protect sterling.

Speaking to BBC Two's Newsnight, former US Treasury Secretary Larry Summers described the situation facing the UK as "very ominous".

"I can't in all honesty remember a time when a set of policy announcements from a G7 country elicited so negative a response both from markets and from economic experts," he said.

"When a country sees its interest rates rise by [as much as they have] in two days at the same time that its currency is falling in a major way, that is a sign that there has been a major loss of market credibility and market confidence.

"The kind of warning that Britain received from the IMF today is a kind of warning that comes much more frequently to emerging markets with new governments than to a country like Britain."

Asked about the UK's plans at an event in Washington, White House economic adviser Brian Deese said he had not been surprised by the negative reaction of the markets and that it was important to focus on "fiscal prudence, fiscal discipline", the Reuters news agency reported.

Moody's credit rating agency said on Wednesday that the UK's plan for "large unfunded tax cuts" was "credit negative" and would lead to higher, persistent deficits "amid rising borrowing costs [and] a weaker growth outlook". Moody's did not change the UK's credit rating.

Labour's shadow chancellor Rachel Reeves said the government must "urgently lay out how it will fix the problems it created through its reckless decisions to waste money in an untargeted cut in the top rate of tax".

"Waiting until November [when the fiscal plan is published] is not an option," she said. Instead, "the government must urgently review the plans made in their fiscal statement last week".

She added: "This statement from the IMF should set alarm bells ringing in government and make it clear that they need to act now."


IMF statement 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."

Newsletter

Related Articles

0:00
0:00
Close
Starmer Arrives in Shanghai to Promote British Trade and Investment
Harry Styles, Anthony Joshua and Premier League Stars Among UK’s Top Taxpayers
New Epstein Files Include Images of Former Prince Andrew Kneeling Over Unidentified Woman
Starmer Urges Former Prince Andrew to Testify Before US Congress About Epstein Ties
Starmer Extends Invitation to Japan’s Prime Minister After Strategic Tokyo Talks
Skupski and Harrison Clinch Australian Open Men’s Doubles Title in Melbourne
DOJ Unveils Millions of Epstein Files, Fueling Global Scrutiny of Elite Networks
France Begins Phasing Out Zoom and Microsoft Teams to Advance Digital Sovereignty
China Lifts Sanctions on British MPs and Peers After Starmer Xi Talks in Beijing
Trump Nominates Kevin Warsh as Fed Chair to Reorient U.S. Monetary Policy Toward Pro-Growth Interest Rates
AstraZeneca Announces £11bn China Investment After Scaling Back UK Expansion Plans
Starmer and Xi Forge Warming UK-China Ties in Beijing Amid Strategic Reset
Tech Market Shifts and AI Investment Surge Drive Global Innovation and Layoffs
Markets Jolt as AI Spending, US Policy Shifts, and Global Security Moves Drive New Volatility
U.S. Signals Potential Decertification of Canadian Aircraft as Bilateral Tensions Escalate
Former South Korean First Lady Kim Keon Hee Sentenced to 20 Months for Bribery
Tesla Ends Model S and X Production and Sends $2 Billion to xAI as 2025 Revenue Declines
China Executes 11 Members of the Ming Clan in Cross-Border Scam Case Linked to Myanmar’s Lawkai
Trump Administration Officials Held Talks With Group Advocating Alberta’s Independence
Starmer Signals UK Push for a More ‘Sophisticated’ Relationship With China in Talks With Xi
Shopping Chatbots Move From Advice to Checkout as Walmart Pushes Faster Than Amazon
Starmer Seeks Economic Gains From China Visit While Navigating US Diplomatic Sensitivities
Starmer Says China Visit Will Deliver Economic Benefits as He Prepares to Meet Xi Jinping
UK Prime Minister Starmer Arrives in China to Bolster Trade and Warn Firms of Strategic Opportunities
The AI Hiring Doom Loop — Algorithmic Recruiting Filters Out Top Talent and Rewards Average or Fake Candidates
Amazon to Cut 16,000 Corporate Jobs After Earlier 14,000 Reduction, Citing Streamlining and AI Investment
Federal Reserve Holds Interest Rate at 3.75% as Powell Faces DOJ Criminal Investigation During 2026 Decision
Putin’s Four-Year Ukraine Invasion Cost: Russia’s Mass Casualty Attrition and the Donbas Security-Guarantee Tradeoff
Wall Street Bets on Strong US Growth and Currency Moves as Dollar Slips After Trump Comments
UK Prime Minister Traveled to China Using Temporary Phones and Laptops to Limit Espionage Risks
Google’s $68 Million Voice Assistant Settlement Exposes Incentives That Reward Over-Collection
Kim Kardashian Admits Faking Paparazzi Visit to Britney Spears for Fame in Early 2000s
UPS to Cut 30,000 More Jobs by 2026 Amid Shift to High-Margin Deliveries
France Plans to Replace Teams and Zoom Across Government With Homegrown Visio by 2027
Trump Removes Minneapolis Deportation Operation Commander After Fatal Shooting of Protester
Iran’s Elite Wealth Abroad and Sanctions Leakage: How Offshore Luxury Sustains Regime Resilience
U.S. Central Command Announces Regional Air Exercise as Iran Unveils Drone Carrier Footage
Four Arrested in Andhra Pradesh Over Alleged HIV-Contaminated Injection Attack on Doctor
Hot Drinks, Hidden Particles: How Disposable Cups Quietly Increase Microplastic Exposure
UK Banks Pledge £11 Billion Lending Package to Help Firms Expand Overseas
Suella Braverman Defects to Reform UK, Accusing Conservatives of Betrayal on Core Policies
Melania Trump Documentary Sees Limited Box Office Traction in UK Cinemas
Meta and EssilorLuxottica Ray-Ban Smart Glasses and the Non-Consensual Public Recording Economy
WhatsApp Develops New Meta AI Features to Enhance User Control
Germany Considers Gold Reserves Amidst Rising Tensions with the U.S.
Michael Schumacher Shows Significant Improvement in Health Status
Greenland’s NATO Stress Test: Coercion, Credibility, and the New Arctic Bargaining Game
Diego Garcia and the Chagos Dispute: When Decolonization Collides With Alliance Power
Trump Claims “Total” U.S. Access to Greenland as NATO Weighs Arctic Basing Rights and Deterrence
Air France and KLM Suspend Multiple Middle East Routes as Regional Tensions Disrupt Aviation
×