By David Milliken
BANGKOK, Oct 14 (Reuters) – The International Monetary Fund is not recommending that Britain speed up its fiscal consolidation to reduce its budget deficit faster, a senior IMF official said on Wednesday.
“Our recommendation is ‘stay the course’. We are not saying ‘accelerate the pace of consolidation’,” fiscal affairs director Rodrigo Valdes said during IMF-World Bank meetings in Bangkok, drawing a contrast with other big economies that have little or no plans to reduce borrowing at a time of rising interest rates.
The British government, which ran a budget deficit of 4.4% of GDP last year, aims to balance day-to-day non-investment spending with tax revenue by the 2029/30 financial year – but previous governments regularly failed to meet similar goals.
Finance minister John Healey, who arrives at the IMF meetings on Wednesday, will deliver his first annual budget on October 28. He faces extra spending demands from higher debt interest costs and pressures to spend more on defence and energy subsidies, as well as rising welfare costs.
Asked if Britain should raise taxes or cut other areas of spending to fund defence, Valdes said many European countries faced similar challenges.
“In general … the space for a lot more revenue, it’s not easy. It distorts at the end of the day. So the discussion about the social contract behind spending is very, very urgent,” he said.
British tax revenue as a share of gross domestic product is close to its highest since just after World War Two, although it is lower than in other European countries with more generous public pensions and welfare systems.
(Reporting by David Milliken; Writing by Mikhail Flores; Editing by Martin Petty and John Mair)
Comments