The International Monetary Fund (IMF) has urged Andy Burnham's incoming government to avoid increasing public spending, as the UK faces 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 Cautious Fiscal Approach
The IMF, which represents around 190 member countries, advised the government to remain focused on economic growth and debt stabilization in a volatile global environment. 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 recommended that future spending reviews prioritize reallocating resources across departments rather than increasing total spending.
Energy Crisis Response Must Be Targeted
The IMF specifically urged the government's response to the Iran war energy shock to be "tightly targeted, temporary and budget-neutral." It warned against universal support schemes like the 2022 energy crisis measure that capped annual energy bills at £2,500 for typical households. "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," the IMF cautioned.
Spending Pressures Mount
The report highlighted rising spending pressures from an ageing population, defence commitments, and the transition away from fossil fuels. The IMF has previously praised Chancellor Rachel Reeves' fiscal strategy for balancing deficit reduction with "growth-friendly spending" and investment in health and education. However, Reeves has indicated she will not remain as chancellor under Burnham, though no Cabinet appointments have been confirmed. Ed Miliband is widely tipped as a possible successor.
Responding to the IMF report, Reeves said: "We have the right economic plan to build a stronger, more secure Britain, with the IMF backing the choices I've made to put the country in a much stronger position than it was two years ago."
