Chancellor Jeremy Hunt has responded to the IMF saying it’s “too early” to know if he’ll be able to cut taxes in the budget.
The IMF earlier warned the chancellor against cutting taxes, an intervention that is unlikely to be welcomed by the government ahead of the budget in early March.
Instead of tax giveaways, the IMF argues the UK needs to curb public borrowing, rebuild its fiscal buffers, and prioritise spending in areas such as health, education and tackling climate change.
Pierre-Olivier Gourinchas, IMF chief economist, said the UK’s focus should be on “the path towards a fiscal consolidation” despite expectations that Hunt will cut taxes at his spring budget.
Speaking at the World Economic Forum in Davos in mid-January, Hunt told UK journalists that he wanted to take the UK in the direction of the faster-growing economies in North America and Asia which tend to have lower taxes.
But on Tuesday, Hunt was keener to point out that the IMF “expect growth to strengthen over the next few years, supported by our introduction of the biggest capital investment tax reliefs anywhere in the world, alongside National Insurance cuts to improve work incentives”.
“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.”