IMF: Government tax plan ‘likely to increase inequality’

The International Monetary Fund (IMF) has questioned the Government’s financial plans, warning that “large and untargeted fiscal packages” are likely to increase inequality and could undermine monetary policy. The IMF has urged ministers to consider targeted support to families and business rather than sizable tax cuts and higher government spending. In a statement, the IMF said it was “closely monitoring” developments and urged Chancellor Kwasi Kwarteng to “re-evaluate the tax measures” set out in his mini-Budget, warning that the measures “will likely increase inequality.” While the IMF said it understands that the “sizeable” fiscal package “aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures … 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.” It added that 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.”

Reuters

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