Sunak and Hunt told to ‘prove IMF wrong’ by cutting taxes
Jeremy Hunt delivers speech on plans for the UK economy
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Rishi Sunak and Jeremy Hunt are under fresh pressure to slash taxes after the International Monetary Fund (IMF) warned Britain’s economy will see the worst performance of all the advanced nations this year. Conservative MPs have renewed calls for tax cuts following the devastating forecast.
In its latest World Economic Outlook update, the IMF downgraded its UK gross domestic product (GDP) forecast to a contraction of 0.6 percent.
The grim outlook for the year ahead puts Britain far behind its counterparts in the G7 group of advanced nations.
The UK is also the only country – across advanced and emerging economies – expected to see its economy slam into reverse this year.
The dire forecast has sparked further calls from Tory backbenchers for the PM and Chancellor to reduce the tax burden, which is at a record high.
Thatcherite Sir John Redwood said: “The Treasury needs to prove the IMF forecasts for a weak UK economy wrong. To do so it needs to go for growth and cut some taxes.”
Former Tory leader Sir Iain Duncan Smith told the i newspaper: “I have said for some time we need growth or our debts will get bigger. Targeted tax reductions will help achieve that.
“Small wonder our economy is shrinking, we have one of the toughest fiscal tightening policies.”
Government minister Richard Holden today insisted the UK can “outperform” the IMF prediction.
He told GB News: “What we’ve seen actually over the last couple of years, this isn’t a forecast, this is what actually happened, both the IMF and the OECD said the UK would grow more slowly than other countries, well let’s look at what actually happened.
“Actually we’ve grown faster than those countries, we’ve grown faster than Germany since 2016, we’ve grown faster than France, Italy, and Japan since 2010. We’re actually outperforming these predictions.
“I’m not saying there aren’t headwinds, internationally, there certainly are, but I think Britain can outperform just like we have done and beat these forecasts just like we have done over the last couple of years.”
Speaking to Times Radio, Mr Holden added: “They’ve been wrong in the last two years, the OECD were also wrong over the last two years. I think Britain can beat those predictions.”
The IMF said Britain’s predicted GDP fall reflects “tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets”.
It comes as Mr Hunt used a major speech last week to talk up the UK economy and its growth prospects.
But he and Mr Sunak are understood to be resisting calls for tax cuts in the March Budget.
The Chancellor said: “The Governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.
“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”
In a chink of light in the economic update, the IMF forecast that the global slowdown will be shallower than first feared.
It upgraded its global growth forecast, to 2.9 percent in 2023 from the 2.7 percent predicted in October as it said the reopening of China after strict Covid restrictions has “paved the way for a faster-than-expected recovery”.
The IMF also said it believes global inflation has passed its peak and will fall from 8.8 percent last year to 6.6 percent in 2023 and 4.3 percent in 2024 as interest rate hikes by central banks begin to cool demand and slow price rises.
But it warned that, in the UK and Europe, surging prices and the impact of action taken to rein in inflation, will continue to weigh on the economy.
It said: “Consumer confidence and business sentiment have worsened.
“With inflation at about 10 percent or above in several euro area countries and the United Kingdom, household budgets remain stretched.
“The accelerated pace of rate increases by the Bank of England and the European Central Bank is tightening financial conditions and cooling demand in the housing sector and beyond.”
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