The International Monetary Fund (IMF) has urged Andy Burnham's incoming government to avoid increasing public spending, advising a cautious approach amid pressures such as rising household energy bills. The Washington-based fund published a new report on the UK as Burnham prepares to become prime minister.
IMF Calls for Fiscal Caution
The IMF, which represents around 190 member countries, said the government should focus on economic growth and debt stabilisation in a volatile world prone to shocks. The report stated: “This calls for a cautious approach to new fiscal pressures: the authorities should be very selective in accommodating new demands and reprioritise, while sticking to the deficit reduction plan.” It added that future spending reviews should reallocate resources across departments rather than increasing total spending.
Energy Crisis Response
Specifically, the IMF urged the government’s response to the Iran war energy shock to be “tightly targeted, temporary and budget-neutral.” This means avoiding universal support schemes like the 2022 energy crisis measure that capped annual bills for typical households at £2,500. The IMF warned: “Broad-based measures, such as cuts in energy taxes, outright energy price caps, or generalised subsidies, should be avoided, as they are costly, difficult to unwind, and weaken price signals.”
Other Spending Pressures
The report also highlighted rising pressures from an ageing population, defence commitments, and the transition away from fossil fuels. The IMF previously praised Chancellor Rachel Reeves’ fiscal strategy for balancing deficit reduction with “growth-friendly spending” and investment in health and education. However, Reeves appears to have conceded she will not remain as Burnham’s chancellor, though no Cabinet appointments have been confirmed. Ed Miliband is widely tipped as a possible successor.
