IMF sounds alarm on UK tax cut plans

bbc.co.uk

6 pointshorsellama2 comments

History has shown time and time again that trickle down economics simply does not work for growing the economy. Austerity does nothing more than stagnate the economy by taking money out of it. I don't think it's an economic illiterate thing to say that people should have enough disposable income to spend on the economy. You want money moving quickly, not getting sucked up and kept stagnant in people's bank accounts.

What the government has announced so far isn't really "trickle down economics". Yes, there are tax cuts specifically at the high end of the income spectrum (and 'only' to abolish the additional income tax rate created relatively recently in 2010 to go back as things had been since 1988, so not exactly revolutionary) but most of them, certainly in term of cost, are for everyone and for companies.

I think the main worry here is not those tax cuts per se, at a 'normal' time markets would have clapped, it's that they mean higher deficit at a time when national debt has already ballooned during Covid, and that they push inflation higher and the Pound lower when the BoE is trying to do the opposite with steep interest rates rises as a consequence.

As per actual IMF statement: "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."

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