But amid a rising debt burden, the UK should not consider further tax cuts, the IMF said: “In the context of these challenges, in general principle, IMF staff advises against further tax cuts.
The government should instead prioritize long-term debt stabilization, according to the IMF report. To ease the debt burden, he said the exchequer’s primary balance – the difference between revenue and expenditure – must be around 1 percentage point of GDP higher than the government’s baseline level. next year.
To do this, the IMF suggested increasing public revenue by increasing taxes on carbon and road use, broadening the VAT and inheritance tax base, and reforming capital gains. and property taxation. These are all measures recommended by the forecaster in its 2023 annual report.
In more positive news, the IMF noted the UK’s “stronger than expected” exit from its technical recession in the second half of 2023, with real GDP growth now forecast at 0.7% in 2024 before rising to 1.5% in 2025.
However, he said the long-term growth outlook for the UK “remains subdued” due to low labor productivity and higher than expected levels of inactivity due to long-term illness.
Hunt said the report shows that “the UK economy has turned a corner and is on track for a soft landing… so it is time to shed some of the unwarranted pessimism about our outlook.”
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