The International Monetary Fund has advised Chancellor Rachel Reeves to consider ending the pensions triple lock and introducing charges for NHS treatment, warning that the UK government risks missing its fiscal targets. In its annual report on the UK economy, the IMF said the triple lock could be replaced with a policy indexing state pensions to the cost of living, and that access to public services could depend more on individuals' ability to pay, with co-payments for health services for higher-income users.
The IMF also urged Reeves to create more fiscal headroom to avoid frequent changes to tax and spending policy. The fund noted that the government's budget rules have enhanced credibility but that risks must be carefully managed, as limited headroom could lead to breaches if growth disappoints or interest rate shocks occur. Achieving growth plans involves significant challenges given limited fiscal space and the volatile external environment, including Donald Trump's trade war.
Further pressure on public finances will come from an ageing population, with IMF analysis showing spending could rise by around 8% of GDP by 2050, compared to 5.5% on average in other advanced European economies. To alleviate these costs, the IMF suggested expanding means testing of benefits and charging higher earners for health services while protecting the vulnerable.
In response, Reeves said the IMF had backed her choices for the UK economy and that her plans would tackle deep-rooted challenges inherited in the face of global headwinds. The chancellor is under pressure to raise taxes later this year to stay on course to meet budget targets, having already increased employer social security contributions in 2024.
