According to the International Monetary Fund, the tax cuts planned by the United Kingdom risk increasing inequalities in the country.
In an unusual statement, the UN agency encouraged Britain – a member of the G7 finance group – to rethink how it will support citizens through its fiscal policy.
Chancellor Kwasi Kwarteng faced criticism after announcing a budget on Friday aimed at boosting growth in the UK through tax cuts and increased spending.
The budget plan, which requires £72bn of additional government borrowing over the next six months, saw the value of the pound tumble to a record low against the US dollar on Monday.
Kwarteng defended his policy. The government said it would present more financial details in a “budget statement” on November 23.
The IMF said in a statement on Tuesday evening: “We understand that the significant fiscal package announced aims to help families and businesses weather the energy shock and boost growth through tax cuts and stimulus measures. supply.
“However, given the high inflationary pressures in many countries, including the UK, we do not recommend large, untargeted fiscal programs at this stage, as it is important that fiscal policy does not work against the grain. course of monetary policy.
“Furthermore, the nature of the UK measures will likely increase inequality.
“The November 23 budget will provide a first opportunity for the UK government to consider ways to provide more targeted support and to reassess tax measures, particularly those that benefit high-income earners.”
A former deputy governor of the IMF – established in 1945 to ensure global financial stability – said it was unusual for the agency to criticize a G7 country.
Adnan Mazarei told the BBC that such statements are “common when it comes to emerging countries with problematic policies, but not often when it comes to G7 countries.”
Britain was forced to seek an IMF loan of nearly $4 billion during the 1976 financial crisis, with IMF negotiators at the time insisting on deep cuts in public spending.
Keir Starmer, leader of the UK’s left-wing opposition Labour, has accused the Conservative government of wreaking havoc on the economy.
“Quite often when the markets are jittery, when the pound is falling, it’s because of an international event – a conflict in Ukraine, a cost of living crisis, an energy crisis. It’s the government that s ‘is inflicted by it himself,’ Starmer told LBC radio. .
The last British budget provided tax cuts for the highest earners, their tax rate dropping from 45% to 40%, as well as a reduction of 1% for employees in the lowest tax bracket.
It also reversed a planned increase in corporation tax from 19% to 25% and scrapped rules limiting bankers’ bonuses.
Kwarteng, who was appointed chancellor on September 6, said he believed the budget would boost economic growth in the UK.