Cutting UK Taxes Is A Wrong Move, IMF Warns.


Mark Flanagan, leader of the Fund’s UK team, speaking to BBC News, said, “I think debt-financed tax cuts at this point would be a mistake.”

The leadership contest has reignited the fierce debate over tax cuts while moves to tackle the surge in costs drive higher. Potential Conservative party leaders promise tax cuts, but a top official at the International Monetary Fund has warned it might be better to raise them.

While the former Chancellor, Rishi Sunak, has contended with the notion of cutting taxes, other candidates have promised to cut taxes.

The IMF is one of the groups predicting the UK might see the slowest growth and most painful inflation of any G7 nation in 2023, considering the dependence on fossil fuels, a key pilot of inflation.

However, Mr. Flanagan said, “tax cuts could be misguided and might even boost inflation by strengthening spending. And the money raised through tax, could instead be used to invest in the country’s Image caption”.

The poorest households in France are now 25% richer compared to their UK counterparts.

Nigel Wilson, the chief executive of Legal & General, believes the UK’s continued underperformance reflects an appalling aversion to investment. He said, “I think [the UK] is full of potential, but we’ve had massive underinvestment for 30, 40 or 50 years in skills, in infrastructure… as a consequence, we’re a low wage, low productivity, low growth economy, fraught by political infighting. “

The IMF’s Mr. Flanagan said public money should be steered towards long-term prosperity projects.

 Karen Ward, chief market strategist at bank JP Morgan and an adviser to Philip Hammond when he was chancellor, said, “Relative to our competitors, there was a break in 2016 at the [European] referendum – business investment fell dramatically and just hasn’t recovered, it remains 10% below the 2015 peak”.

Flanagan proposed that settling the current controversy over post-Brexit trading in Ireland could help revive investment. “It’s going to be hard to convince companies to invest a lot in incorporating the UK into their supply chains while issues related to cross-border movement of goods and services remain unsettled,” he said.

With the several options available, it is uncertain whether Uk will heed IMF’s warning.

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