UK’s mini-budget U-turn welcomed by IMF

The UK government’s U-turn on tax cuts will help tackle soaring inflation, the International Monetary Fund has said.

In a statement, the IMF said the changes will help “better align fiscal and monetary policy in the fight against inflation”.

The statement comes after the body had openly criticised the UK government in September over its plan for tax cuts.

Last month, the IMF said the tax cut plan was likely to increase inequality and add to pressures pushing up prices.

In an unusual move, it openly criticised the UK government’s tax cuts plan, and then warned that rising prices would be worse in the UK.

The IMF had said the policy worked at cross-purposes with measures designed to slow how quickly the cost of living was rising.

After market turmoil following the mini-budget, the government made a U-turn, reversing a pledge to cut the top rate of income tax.

Then on Monday the new Chancellor Jeremy Hunt made a dramatic U-turn on the government tax cuts plans, undoing swathes of policies from former Chancellor Kwasi Kwarteng and Prime Minister Liz Truss.

The pound rose and the cost of government borrowing fell.

On Tuesday the IMF welcomed the U-turns, saying: “The UK authorities’ recent policy announcements signal commitment to fiscal discipline and help better align fiscal and monetary policy in the fight against inflation.”

The IMF tries to stabilise the global economy and one of its main roles is to act as an early economic warning system.

It had urged the government to reconsider its tax plans, saying they would be likely to increase inequality.

In addition, it had warned that the cuts could speed up the pace of price rises, which the Bank of England is trying to bring down.

Reports /TrainViral/