Kwasi Kwarteng may, for once, be wishing that the current batch of strike action engulfing the UK extended to his internet provider or paper boy as today’s websites, broadsheets and tabloids make gloomy reading for the embattled chancellor.
As the crisis in the financial markets deepens forcing an intervention in the gilts market today by the Bank of England, the chancellor’s reported plea to traders to stop shorting the pound (which the Treasury denies) sounded like a desperate plea from a desperate man.
Pressure was further heaped on those in number 10 and 11 Downing Street by The International Monetary Fund (IMF) which became the latest, and perhaps most damaging, organisation to launch a stinging attack on the UK’s tax-cutting plans, with the kind of intervention usually reserved for an emerging economy facing a current account crisis.
Here’s the full IMF statement.
All quite withering.
The kind of statement one normally expects to hear about an emerging economy facing a current account crisis.
Worth reading in full… pic.twitter.com/QAJl2JM9ip
— Ed Conway (@EdConwaySky) September 27, 2022
In rare public criticism of a leading global economy, the Washington-based fund said Kwasi Kwarteng’s fiscal statement risked undermining the efforts of the Bank of England to tackle rising inflation amid the cost of living crisis.
It said it “was closely monitoring recent economic developments in the UK” and was engaged “with the authorities.”
“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture” it said.
It suggested a statement planned by Kwarteng for 23 November presented an “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.”
The rebuke comes amid a growing international backlash over the chancellor’s £45bn of tax cuts, with the intervention from the IMF swiftly followed by sharp criticism from the credit rating agency Moody’s.
Moody’s said the UK’s “large unfunded tax cuts are credit negative” adding a “sustained confidence shock arising from market concerns over the credibility of the government’s fiscal strategy that resulted in structurally higher funding costs could more permanently weaken the UK’s debt affordability.”
“The large unfunded fiscal stimulus” will “prompt more aggressive monetary policy tightening, weighing on growth in the medium term” Moody’s added.
???? Moody's rating agency tonight warns the UK's new fiscal policy regime is "credit negative".
"A sustained confidence shock arising from market concerns over the credibility of the government's fiscal strategy...could permanently weaken the UK's debt affordability" pic.twitter.com/dCwsnfCxyc
— Mehreen Khan (@MehreenKhn) September 27, 2022
The move by the IMF is rare given the influence of the UK in the global economy, and as one of the organisation’s largest shareholders.