The International Monetary Fund has openly criticized the UK government over plans for tax cuts, warning that the measures will fuel a crisis in cost-of-living.
In an unusually blunt statement, the IMF said the proposal was likely to increase inequality and increase inflationary pressures.
Markets have already sounded alarm bells over the plans, sending the pound tumbling.
The government says that economic growth will start with these measures.
On Wednesday morning, sterling fell 0.7 percent to $1.06 after the IMF voiced its concerns. This comes after the currency hit a record low of around $1.03 on Monday.
Chancellor Kwasi Kwarteng on Friday unveiled the country’s biggest tax package in 50 years. But the £45bn cut has sparked fears that interest rates could rise as well as government debt.
The IMF works to stabilize the global economy and one of its main roles is to act as an economic early warning system.
He said he understood the package was aimed at boosting growth, but warned that the cuts could accelerate inflation, which Britain’s central bank is trying to bring down.
“Furthermore, the nature of the UK’s measures is likely to increase inequality,” it said.
‘Review’
The IMF said the government’s publication of a fiscal plan on November 23 gave it an opportunity to “reassess” tax measures, “especially those that benefit high-income earners”.
The UK government’s proposals would scrap the top rate of income tax, and cap bankers’ bonuses, among other measures.
Friday’s announcement sparked days of financial turmoil, as investors dumped the pound and UK debt. Some of the country’s biggest lenders also suspended mortgage deals amid the uncertainty.
The Treasury said: “We are focused on growing the economy to raise living standards for all.”
It added that Mr Quarting was due to publish his medium-term plan for the economy on November 23, which would include ensuring that UK debt falls as a share of economic output over the medium term.
