The International Monetary Fund’s latest forecast is a double-edged sword: we might ride out a storm and dodge recession, but the government is unlikely to budge on high taxation – with diminishing returns for us.
The UK’s economic situation, having been stricken by post-Brexit hindrances, a pandemic and surging inflation, has been in more dire straits than the average undergraduate’s overdraft, so much so that we have almost become used to it.
A beacon of hope, or false hope rather, lies in the IMF ( the International Monetary Fund) that The UK will escape a recession this year, adding that the economy had been “buoyed by resilient demand in the context of declining energy prices”.
This comes as a surprise and marginal contrast to the initial projections from the IMF, which foresaw in January that the UK economy would shrink by 0.5 per cent between the final quarter of 2022 and the last quarter of this year.
It was still forecasting a recession as late in the day as last month.
However, this was paired with an elephant in the room-sized caveat that high energy prices would be replaced by more persistent price and wage pressures that could lead inflation to “plateau”.
That didn’t matter much to Chancellor Jeremy Hunt who responded to the IMF’s findings with more captain hindsight energy than the Tories could ever accuse the labour front bench of.
Hunt said the IMF’s new prediction was a testament to the UK government’s “action to restore stability and tame inflation” and claimed that the country’s prospects were now “stronger than in Germany, France and Italy”.
Hunt’s previous ministerial roles include being a member of David Cameron’s cabinet between 2010 and 2016, an administration that placed austerity measures as a means of quelling a UK economy bleed out. This vampiric philosophy has evidently found its way into the Sunak Cabinet with tax rates at post-war highs.
The recommendations for policy are even more so likely to evoke a Wallace and Gromit grin on Hunts’ AI-generated visage: further monetary tightening, and steering away from tax cuts in the near future according to the IMF. These are go-ahead prompts for an already high taxation government to continue them with the speed of Suella Braverman in the fast lane.
Some of the recommendations whilst seeming good on the surface could easily cede ground to government revenue poured down the drain if misdirected, it urged the government to strengthen carbon taxation and reform property taxes but it remains to be seen whether these tax policies can be effectively utilised.
Some recommendations are not so politically tenable or opportune for the Tories however: The IMF also warned the UK government to avoid a pre-election spending splurge that could prevent the BoE’s bringing down inflation.
For a party that spent at least 16 million on the 2019 election in the not-too-distant future and truly dire polling for support, financial prudence may be unworkable in the context of staying at number 10. Whichever way you look at it, it could be death for Tories by a thousand cuts.