On 30 January 2024 the IMF held a press briefing on the latest update to the World Economic Outlook.
During the press briefing Pierre-Olivier Gourinchas, the Chief Economist and Director of the Research Department at the IMF, responded to questions raised by some media outlets on the issue of whether tax cuts are appropriate in the UK at this point in time.
The IMF is projecting economic growth of 0.6% for the UK in 2024, unchanged from the October 2023 projections. Growth is expected to increase in 2025 to around 1.6%, closer to normal levels. The IMF considers that the UK and a number of other countries need to put in place medium term fiscal plans to prepare for a very significant increase in spending pressures.
In the case of the UK there will be a need for spending on healthcare and modernizing the health system, in addition to spending on social care and on education. There will also be a need for public investment to fund the climate transition and to boost economic growth. The UK therefore requires medium term fiscal plans that accommodate these pressures, and this will require a combination of tax and spending measures to allocate resources to where they are needed while keeping debt levels stable.
There is currently a discussion within the UK on the possibility of tax cuts which could be proposed in the spring budget. However the IMF is advising against further discretionary tax cuts in the UK at this time owing to the need to prepare for critical government spending in the medium term.
