IMF criticises the UK government tax plans

The International Monetary Fund (IMF) has openly criticised the UK government over its plan for tax cuts, warning that the measures are likely to fuel the cost-of-living crisis.

In an unusually outspoken statement, the IMF said the proposal was likely to increase inequality and add to pressures pushing up prices.

Markets have already raised alarm over the plans, sending the pound plunging.

The government says the measures will kickstart economic growth.

On Wednesday morning, sterling fell by 0.7% to $1.06 after the IMF raised its concerns. It comes after the currency hit a record low of around $1.03 on Monday.

Chancellor Kwasi Kwarteng unveiled the country’s biggest tax package in 50 years on Friday. But the £45bn cut has sparked fears that government borrowing could surge along with interest rates.

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

It said it understood the package aimed to boost growth, but it warned that the cuts could speed up the pace of price rises, which the UK’s central bank is trying to bring down.

“Furthermore, the nature of the UK measures will likely increase inequality,” it said.