London (Parliament Politics Magazine) – IMF has welcomed the steps announced by Rachel Reeves in her first budget, expressing her £40bn of tax rises would increase growth “sustainably”.
The Washington-based International Monetary Fund (IMF) supported her increase in investment and extra spending to reduce the financial strain on public services and promote growth. A spokesperson for the fund expressed new budget rules revealed the government was committed to bringing down the UK’s debts over the longer term.
“We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue,” they stated, adding that the IMF supported of the government’s “focus on boosting growth through a needed increase in public investment while addressing urgent pressures on public services”.
What is the goal of the £40bn tax rise?
On 20 Oct 2024, Rachel Reeves announced tax increases of more than £40bn in her first Budget, including a £25bn growth in employer NI contributions, which will increase by 1.2 percentage points to 15 per cent from April. She expressed the fiscal event would lay the basis for higher growth, better public services — notably the NHS and schools — and lock in financial stability.
Reeves told the BBC that companies would have to absorb some of the extra expense through profits, adding that it was “likely to indicate that wage increases might be slightly less than they otherwise would have been”. But she mentioned an analysis by the Office for Budget Responsibility that forecasts household earnings still increasing in this parliament.
Tax and benefit differences outlined in the budget would “fall on everyone’s shoulders” once the combined effect of welfare cuts, an expansion in employer national insurance rises and tax climbs on consumer goods are felt evenly across the income distribution.