| Cherie |
28-09-2022 06:36 AM |
The International Monetary Fund has urged Liz Truss to reverse the decision to abolish the top rate of income tax, in a highly unusual attack on the economic policy of a G7 country.
The world’s lender of last resort heaped pressure on Ms Truss and the Chancellor, as it urged Kwasi Kwarteng to use his fiscal plan in November to change course.
The IMF said it was “closely monitoring recent economic developments in the UK and are engaged with the authorities" and warned that the fiscal stimulus risked undermining the Bank of England’s efforts to curb inflation.
A spokesman for the Washington DC-based organisation said Mr Kwarteng's announcement in November would “present an early opportunity for the UK Government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners”.
It is an extremely rare intervention by the IMF over a developed country’s economic policy.
The rating agency Moody's this evening joined the IMF in warning over the Chancellor's plans, raising the spectre of a downgrade to the*UK's outlook and branding the mini-Budget "credit negative".*
Moody's said it was now not expecting economic growth to return to its potential until 2026, and cut its forecasts for GDP growth next year. It said the unfunded tax cuts would lead to "structurally higher deficits".**
The credit ratings agency said: "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."
The comments come as a warning to the UK that it risks a downgrade to its credit rating, which would raise borrowing costs. These costs have already reached their highest level since 2011 and the wake of the financial crisis.
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