The International Monetary Fund (IMF) has warned Andy Burnham against increasing public spending or raising taxes as he prepares to enter Downing Street.
In its latest assessment of Britain’s economy, published today, the Washington-based organisation urged the incoming Prime Minister to remain focused on economic growth and reducing the deficit amid an increasingly uncertain global outlook.
The IMF said: “This calls for a cautious approach to new fiscal pressures: the authorities should be very selective in accommodating new demands and reprioritise, while sticking to the deficit reduction plan.”
The organisation also addressed the impact of the conflict involving Iran on energy prices, saying any Government support should be “tightly targeted, temporary and budget-neutral”.
The IMF said future spending reviews should focus on reallocating funding between Government departments rather than increasing overall public spending.
It said this approach would require ministers to prioritise some areas of spending while reducing funding elsewhere.
The organisation also warned against repeating the wide-ranging energy support introduced during the 2022 energy crisis, when household energy bills were capped at £2,500 a year.
The IMF said: “Broad-based measures, such as cuts in energy taxes, outright energy price caps, or generalised subsidies, should be avoided, as they are costly, difficult to unwind, and weaken price signals.”
‘Broad-based measures should be avoided’, IMF warns Andy Burnham over spending and tax rises
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GETTYThe report highlighted growing fiscal pressures linked to an ageing population, higher defence spending and the transition to cleaner sources of energy.
The IMF also proposed longer-term reforms aimed at slowing the growth of public spending.
It recommended replacing the state pension triple lock with annual increases linked only to inflation.
The organisation said: “Deeper expenditure reforms should be considered, for example replacing the ‘triple lock’ with a policy of indexing the state pension to the cost of living.”
UK Tax Burden as a percentage of GDP | GB News
The IMF also suggested expanding charges within the NHS beyond existing fees for prescriptions and dental treatment, while maintaining protections for vulnerable patients.
It said such an approach would bring Britain more closely into line with healthcare systems used elsewhere in Europe.
The organisation also warned Britain’s tax burden is already on course to reach historically high levels and said further increases could weigh on economic growth while encouraging wealthy individuals to leave the country.
The intervention comes a day after Mr Burnham said he was considering tax increases, suggesting the British public may need to contribute “a little more”.
The Organisation for Economic Co-operation and Development issued similar advice on Wednesday, saying Britain’s record tax burden meant the incoming Prime Minister would need to prioritise spending reductions to improve the public finances.
Chancellor Rachel Reeves defended the Government’s economic record following publication of the IMF report.
Ms Reeves said: “We have the right economic plan to build a stronger more secure Britain, with the IMF backing the choices I’ve made to put the country in a much stronger position than it was two years ago.”
Ms Reeves is not expected to remain as chancellor under Mr Burnham, with Energy Secretary Ed Miliband widely viewed as a leading contender for the role.