Labour told not to spend what it can't afford trying to ease the cost of living: IMF's warning as it downgrades UK growth forecast
Labour has been warned not to splash out on cost of living measures that the country cannot afford as Britain's economic outlook was downgraded by the International Monetary Fund.
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The IMF released its latest World Economic Outlook forecasts at its annual meeting in Bangkok.
"The latest forecasts in the IMF's outlook, released at the Fund's annual meeting in Bangkok, show no improvement in Britain's soft jobs market with unemployment remaining at 5.3 per cent this year and next."
The UK and France were the only two G7 countries to see their growth forecasts for next year cut by the IMF.
"Its latest World Economic Outlook report made dismal reading for Chancellor John Healey as the UK and crisis-ridden France were the only two G7 countries to see growth forecasts for next year cut."
The IMF upgraded Britain's growth forecast for this year from 1 per cent to 1.3 per cent after a better expected performance.
"Britain's forecast for this year was however upgraded from 1 per cent to 1.3 per cent after a better expected performance so far."
The IMF warned countries facing a cost of living squeeze to tighten their belts rather than spend heavily.
"The IMF raised the alarm over the potential for high spending by countries facing a cost of living squeeze – and said they should instead be tightening their belts."
The Institute for Fiscal Studies predicted a £35 billion black hole in the public finances by the end of this Parliament.
"Pressure on the Chancellor is intensifying with the influential Institute for Fiscal Studies predicting a £35 billion black hole in the public finances by the end of this Parliament."
The IMF downgraded France's growth outlook from 0.9 per cent to 0.7 per cent, making it the only other G7 country downgraded.
"France – which is grappling with a budget crisis, major student riots, and political paralysis – was the only other member of the G7 group of advanced economies to see its outlook downgraded for next year, from 0.9 per cent to 0.7 per cent."
The IMF said broad-based fuel subsidies, generalized tax cuts, and price controls should be avoided.
"'Broad-based fuel subsidies, generalized tax cuts, and price controls should be avoided,' it said."
The Bank of England is expected to raise Bank rate from 3.75 per cent to 4 per cent before the end of the year.
"The continued upward pressure on inflation in Britain, with the cost of energy forecast to jump sharply in January, will intensify pressure on the Bank of England to raise Bank rate from 3.75 per cent to 4 per cent before the end of the year, lifting the cost of home loans and business lending."
The IMF downgraded the UK's 2027 growth forecast from 1.3 per cent to 1.2 per cent.
"The IMF cut its 2027 growth forecast for Britain from 1.3 per cent to 1.2 per cent 'as higher energy prices and long-term interest rates weigh on consumption and investment'."