ALEX BRUMMER: IMF has been benign about UK under Labour but latest furore could change
Every spring, the International Monetary Fund (IMF) comes calling for its annual inspection of Britain and a sober analysis of the country’s economic and financial prospects.
Until now, it has been relatively benign about Britain under Labour rule, signing off on Chancellor Rachel Reeves’ redrawing of the fiscal rules.
Indeed, the Fund’s UK team can take pride in persuading the Treasury that Britain’s habit of two fiscal statements a year, with evermore tax changes, has been counterproductive for stability.
The IMF team cannot have expected to have been thrust into the political furore after the local and devolved-nations elections.
Such chaos is usually seen in Latin America; Greece, pre-2010 bailout; and Italy, before the calming era of populist prime minister Giorgia Meloni.
We know from April’s World Economic Outlook report that the IMF had concerns about the UK economy after the current Middle East crisis began.
Looking for a way out?: The country has struggled under Keir Starmer and Rachel Reeves
Despite the aspirational claims by Keir Starmer and Reeves of having brought stability to the economy, there were already worries, before the present political mayhem, of overstretch in the public finances.
Reeves’ £75billion of tax hikes raised questions as to whether Britain has reached peak taxation.
Raising levies on incomes and businesses produces ever less money for the Exchequer.
The inspectors, if they can be coaxed into saying so, will not be overly impressed by the idea of big-spending Labour Leftists arriving in Downing Street ready to bloat the public sector even further and to embark on a nationalisation wave.
Even ahead of the present bloodletting in the bond markets, where UK borrowing costs have advanced by one percentage point since February, IMF economists were concerned about a misfiring gilts market.
If that was the case a month ago, imagine how they must feel now after sharp rises in the closely watched 30-year and ten-year yields.
Structural changes, such as the rundown of UK pension funds, are partly responsible for increased volatility. Hedge funds now hold the whip hand.
It is fear of red-in-tooth-and-claw socialism that is causing the current, catastrophic spike in yields. That, in turn, raises the national interest rate bill. It will make the task of bond-market sceptic Andy Burnham, should he end up as Prime Minister, even more difficult.
Helping himself
The timing of Tesco chief executive Ken Murphy’s £10.8million pay package could have been more propitious.
He may be deserving, but it comes before a Labour leadership contest in which candidates will be competing to say how tough they would be on wealth and business.
Rachel Reeves’ first instinct after the outbreak of the war with Iran was to summon supermarket and food bosses to Downing Street to warn against price gouging.
In a highly competitive market, Tesco has not managed to strengthen its market share by hammering shoppers. Critics should please note.
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