IMF urges chancellor Kwasi Kwarteng to 're-evaluate' tax cut

The International Monetary Fund (IMF) has said it is “closely monitoring” developments in the UK and has urged Kwasi Kwarteng to “re-evaluate” the tax measures he put in place.

It comes after the chancellor announced a £45bn tax cut funded by Government borrowing.

Markets reacted sharply to Kwarteng’s mini-budget, with sterling slumping to its lowest level against the dollar since 1971 on Monday.

In a statement released on Tuesday, the IMF – an international body with 190 member countries that works to monitor and support the economy – warned against the plans.

The organisation also warned that the measures would likely “increase inequality”.

Kwarteng has insisted he is “confident” that his tax-cutting strategy will deliver the promised economic growth.

“We understand that the sizeable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures,” said the IMF.

“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.”

A medium-term fiscal plan will be set out by the chancellor on November 23, accompanied by an Office for Budget Responsibility forecast.

The IMF suggested that Kwarteng should use that time to reassess the plans.

“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,” it said.

In response to the criticism, a Treasury spokeswoman said: “We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise caused by (Vladimir) Putin’s illegal actions in Ukraine.”

The SNP’s Westminster leader Ian Blackford described the intervention by the IMF as “utterly damning”, as he made the case for Scottish independence.

He said: “The Tory budget has been an unmitigated disaster. It’s clearer than ever that Scotland needs to become an independent country to escape the damage of Westminster control and get rid of the Tories for good.

“Liz Truss must stop dodging scrutiny and recall Parliament immediately. It’s a disgrace that MPs are being blocked from holding the UK Government to account while the UK economy is in crisis.

“The Prime Minister and chancellor must bring forward an emergency budget within days, not weeks, and publish OBR forecasts to undo the reckless damage they have inflicted and prevent this crisis spiralling further into catastrophy.

“The IMF intervention is utterly damning and it underlines just how absurd and economically illiterate it is for Douglas Ross and the Scottish Tories to demand that the Scottish Government make the same mistakes as the UK Government.”

Blackford added: “People in Scotland are literally paying the price for Westminster failure.

“With all the Westminster parties signed up to broken Tory economics and a disastrous hard Brexit, independence is the only way to keep Scotland safe.”