Rishi Sunak and Jeremy Hunt are under renewed pressure to cut taxes after the International Monetary Fund (IMF) warned that Britain’s economy will see the worst performance of any advanced nation this year. Tory MPs have renewed their calls for tax cuts following the dire forecast.
In its latest World Economic Outlook update, the IMF downgraded its forecast for the UK’s gross domestic product (GDP), which is expected to contract by 0.6%.
These bleak prospects for the year ahead put Britain far behind its counterparts in the G7, the group of advanced nations.
The UK is also the only country – among advanced and emerging economies – expected to see its economy collapse this year.
The alarming predictions have prompted fresh calls from Tory MPs for the Prime Minister and Chancellor to reduce the tax burden, which is at an all-time high.
Thatcherite Sir John Redwood said: “The Treasury must prove that the IMF forecast of the weakness of the UK economy is wrong. To do this, it must bet on growth and reduce certain taxes. »
Former Tory leader Sir Iain Duncan Smith told the i newspaper: “I have been saying for some time that we need growth, otherwise our debts will increase. Targeted tax cuts will help achieve this.
“It’s no wonder our economy is shrinking, we have one of the toughest fiscal tightening policies. »
Government Minister Richard Holden today insisted the UK can ‘surpass’ IMF forecasts.
He told GB News: “What we have seen over the past two years is not a prediction, it is what actually happened. The IMF and the OECD have both said that UK growth will be slower than other countries, so let’s look at what really happened.
“In fact, we have grown faster than these countries, we have grown faster than Germany since 2016, we have grown faster than France, Italy and Japan since 2010. We we are in fact exceeding these predictions.
“I’m not saying there aren’t headwinds, internationally there certainly are, but I think Britain can outperform like we did and beat those predictions like we do. have been doing for the past two years. »
Speaking to Times Radio, Mr Holden added: “They have been wrong for the last two years, the OECD has been wrong for the last two years as well. I think Britain can beat those predictions. »
The IMF said Britain’s forecast drop in GDP reflects “tighter fiscal and monetary policies and financial conditions, as well as continued high retail energy prices weighing on household budgets”.
The statement comes as Mr Hunt used a major speech last week to talk about the UK economy and its growth prospects.
But it appears he and Mr. Sunak are resisting calls for tax cuts in the March budget.
The Chancellor said: “The Governor of the Bank of England recently said that any recession in the UK this year is likely to be less deep than expected, but these figures confirm that we are not immune to the pressures hitting almost all advanced economies.
“Short-term challenges should not overshadow our long-term outlook – the UK beat many forecasts last year, and if we stick to our plan to halve inflation, the UK UK is still expected to grow faster than Germany and Japan over the next few years. »
In a glimmer of hope in the economic update, the IMF predicts that the global slowdown will be smaller than feared.
He revised his forecast for global growth upwards to 2.9% in 2023, from 2.7% forecast in October, as he said China’s reopening after tight Covid restrictions has “opened the way to a faster-than-expected recovery.”
According to IMF
The IMF also said it believed global inflation had passed its peak and would rise from 8.8% last year to 6.6% in 2023 and 4.3% in 2024, the increases interest rates from central banks starting to cool demand and slow the rise in prices.
But she warned that in the UK and Europe, soaring prices and the impact of measures taken to contain inflation will continue to weigh on the economy.
She said: “Consumer confidence and the business climate have deteriorated.
“With inflation around 10% or more in several eurozone countries and the UK, household budgets remain stretched.
“The accelerated pace of rate hikes by the Bank of England and the European Central Bank is tightening financial conditions and cooling demand in the housing sector and beyond. »
This article is originally published on encause.fr