Temporary tax cuts could boost UK economy, says IMF
TAX cuts could kick start the UK economy if it suffers a “prolonged period of weak growth”, the International Monetary Fund (IMF) said yesterday.
Despite a resounding message of support for chancellor George Osborne’s “Plan A” of immediate fiscal consolidation, the IMF proposed temporarily slashing taxes in the event of slower than expected growth. This would have to go hand in hand with deeper reforms and even lower public spending, the IMF’s annual verdict states. Deficit reduction remains “essential”, it added.
“The IMF’s analysis makes it plain that George Osborne doesn’t need a Plan B,” commented Mark Littlewood of the Institute of Economic Affairs.
“But he does need Plan A+. He needs a serious strategy for growth. And if the government does have any room for manoeuvre, tax cuts should be the priority,” Littlewood added.
The British economy will expand by 1.5 per cent this year, the IMF expects, down from its previous forecast of 1.7 per cent. Growth of 2.5 per cent will still be achieved in the medium term, the IMF predicts.