THE International Monetary Fund has openly condemned the UK government over its tax cuts that handed billions to the rich, warning that the measures will fuel the cost-of-living crisis, drive up inflation and create the conditions for a worldwide capitalist collapse.
In its statement, the IMF treated the UK as a ‘Third World’ country saying: ‘We are closely monitoring recent economic developments in the UK and are engaged with the authorities. We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.
‘However, given elevated inflation pressures in many countries, including the UK, 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.
‘Furthermore, the nature of the UK measures will likely increase inequality. The November 23 budget will present an early opportunity for the UK government to consider ways to provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high income earners.’
However, capitalist stock markets have already raised the alarm over the UK plans, sending the pound plunging downwards against the US dollar.
The IMF’s Adnan Mazarei commented, saying ‘the fear’ is that the Bank of England and the Treasury are not working together for the benefit of the UK economy.
He said: ‘There is also a sense of problems in the country’s economic management and their ability to handle issues, which could lead to problems of inflation and financial market difficulties … for example, we’ve seen problems in the mortgage markets which will hurt UK households.’
On Tuesday, the Bank of England signalled that it is prepared to ramp up interest rates in response to the slump in the value of the pound.
Former US Treasury Secretary Larry Summers described the situation facing the UK as ‘very ominous’. ‘I can’t in all honesty remember a time when a set of policy announcements from a G7 country elicited so negative a response both from markets and from economic experts,’ he said.
He also characterises the UK as a Third World State saying: ‘The kind of warning that Britain received from the IMF today is a kind of warning that comes much more frequently to emerging markets with new governments than to a country like Britain.’
Moody’s credit rating agency said yesterday that the UK’s plan for ‘large unfunded tax cuts’ is ‘credit negative’ and will lead to higher, persistent deficits ‘amid rising borrowing costs and a weaker growth outlook’.
Yesterday 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 last Friday. The IMF 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.
The UK government proposals will scrap the top rate of income tax, and end a cap on bankers’ bonuses, among other measures. The announcement on Friday sparked days of financial crashes as capitalists and bankers dumped the pound and UK debt.
There are fears that the UK crisis will drive up interest rates and with them mortgage costs, creating the conditions for a massive worldwide crash.
Lord Frost, the former Brexit minister and close ally of Prime Minister Liz Truss, criticised the IMF’s statement. He told the Daily Telegraph: ‘The only way forward for Britain is lower taxes, spending restraint, and significant economic reform.’ Part of this significant reform is the Truss plan to make trade unionism illegal.
Meanwhile, the capitalist world trembles that the UK economy will crash bringing down the rest of the capitalist world with it.
The working class will not sit back while its living standards and jobs are destroyed. It must, and will, take action to defend them and to defeat the British ruling class and its international allies. The TUC must be forced to call a general strike to bring down the Truss government and bring in a workers’ government.
The News Line urges workers to lobby the TUC Congress in your thousands on Tuesday October 18th at 8am to demand that it immediately call a general strike to bring down the Tories, and bring in a workers government that will nationalise the banks and the major industries to bring in a planned socialist economy to put an end to British capitalism and its crisis.
This is the only way forward!
