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LONDON (AP) — The International Monetary Fund has urged the U.K. government to “reevaluate” a package of unfunded tax cuts that it says may fuel inflation and are likely to increase economic inequality.
The government on Friday unveiled a 45 billion-pound ($48 billion) package of tax cuts in an effort to spur economic growth. But the plan wasn’t accompanied by spending cuts, raising concerns that it would swell government debt and add to inflation that is already running at close to a 40-year high.
“Given elevated inflation pressures in many countries, including the U.K., we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” the IMF said in a statement. “Furthermore, the nature of the U.K. measures will likely increase inequality.”
The British pound fell to a record low against the U.S. dollar on Monday amid investor concern about the government’s policies. The Bank of England on Monday sought to stabilize markets, saying that it was prepared to raise interest rates “as much as needed” to rein in inflation.
The U.K. government says it will set out a more detailed fiscal plan and independent analysis from the Office for Budget Responsibility on Nov. 23.
“The Nov. 23 budget will present an early opportunity for the U.K. government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high income earners,” the IMF said.
In response, a spokeswoman for the U.K. Treasury said the government was “focused on growing the economy to raise living standards for everyone.”
The November statement will set out further details of the government’s plan and ensure that debt falls as a share of gross domestic product “in the medium term,” she said.