‘Slap in the face’ for working people as IMF praises Reeves’s Budget

Fund applauds ‘sustainable’ revenue raising despite forecasts showing drag on growth

The International Monetary Fund (IMF) has been criticised for praising Rachel Reeves’s “gloom and bust Budget” despite official forecasts showing it will drag on growth and hit living standards.
The IMF applauded Ms Reeves’s first fiscal event for “sustainably” raising revenue, after she announced a string of levy increases hitting workers, businesses and wealthy people.
A spokesman said of the Budget: “We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue.”
The Fund also said it welcomed Ms Reeves “boosting growth through a needed increase in public investment while addressing urgent pressures on public services”.
Robert Jenrick, Conservative Party leader hopeful, branded the IMF’s remarks a “slap in the face” for working people after the world’s lender of last resort endorsed the tax rises.
The remarks come despite the Office for Budget Responsibility (OBR) warning that the Chancellor’s tax increases will lead to growth being slightly lower than it otherwise would by the end of the decade.
Living standards, as measured by the disposable income families have when adjusting for inflation, will also rise less because of the increase in employer National Insurance contributions.
Mr Jenrick said: “This gloom-and-bust Budget is predicted by the OBR to lower growth, increase inflation and cause debt to balloon. For working people being crippled by higher taxes, the IMF’s comments welcoming this Budget will feel like a slap in the face.”
The IMF traditionally only rarely comments on UK chancellors’ Budgets. However, it has stepped up the frequency of its judgements in recent years.
The Washington-based organisation rebuked Liz Truss after her mini-Budget, urging the short-lived former prime minister to “re-evaluate” her tax cuts.
It also endorsed Jeremy Hunt’s decision to reverse Ms Truss’s plans less than two months later when he became chancellor.
The Fund has several times had to correct its predictions for the UK economy after being too gloomy.
Most of the IMF’s forecasts for UK growth since Brexit have proved to be too pessimistic, Telegraph analysis shows. Only 12 out of 32 predictions made for annual growth covering the years 2016 to 2023 were either accurate or too optimistic. The remainder proved too negative.
Douglas McWilliams, deputy chairman of the Centre for Economics and Business Research, said: “The IMF does not have a great track record of either forecasting or understanding policy. If you keep getting your forecasts wrong, it calls into doubt virtually everything else you do.”
Addressing the Budget, he said: “The problem if you reduce growth is that it reduces tax revenue. That means increased borrowing. So the numbers on which the IMF is commenting on are almost certainly wrong.”
Ms Reeves has admitted taxes may have to rise further despite insisting that her plans were a “once in a parliament Budget”.
Britain’s tax burden is on course to hit a historic high of 38.2pc by the end of the decade, up by 5.1 percentage points compared to before the pandemic.