Conservative electoral victories across Europe have the continent’s left-wing establishment nervous. New British Prime Minister Liz Truss and her chancellor have announced a program of tax cuts intended to incentivize growth in Britain’s economy. Who knows? It has worked before, it may work again.
But the International Monetary Fund isn’t waiting to find out. It demands that the U.K. change its announced policy to conform to liberal norms. The Telegraph reports:
The International Monetary Fund has urged Liz Truss to reverse the decision to abolish the top rate of income tax, in a highly unusual attack on the economic policy of a G7 country.
The IMF said it was “closely monitoring recent economic developments in the UK and are engaged with the authorities” and warned that the fiscal stimulus risked undermining the Bank of England’s efforts to curb inflation.
A spokesman for the Washington DC-based organisation said Mr Kwarteng’s announcement in November would “present an early opportunity for the UK Government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners”.
It is an extremely rare intervention by the IMF over a developed country’s economic policy.
Extremely rare indeed. The IMF’s stated concern is that cutting currently-exorbitant taxes on high earners will increase Britain’s budget deficit. But the Truss administration has announced a number of proposed tax cuts, of which this is just one. So why single it out? Also, if deficits are the issue, how about spending restraint? The IMF could have said (if it was determined to intervene in British politics) that the tax cuts need to be balanced by spending cuts. But that isn’t what happened. The IMF was sticking up for liberal policies, not for fiscal responsibility.
One might also note that the IMF had no apparent problem with our own government’s shoveling trillions of dollars in borrowed money out the door under the flimsy pretext of covid relief.
The IMF move drew an angry reaction from senior Tories on Tuesday night. Lord Frost, the former Brexit minister and an ally of Ms Truss, told The Telegraph: “The IMF has consistently advocated highly conventional economic policies. It is following this approach that has produced years of slow growth and weak productivity.
“The only way forward for Britain is lower taxes, spending restraint, and significant economic reform. Liz Truss and Kwasi Kwarteng are rightly focused on delivering this and they should tune out the criticism from those who are still in the intellectual world of Gordon Brown.”
Well put. The IMF is one cog in a left-wing international establishment that constantly has its thumb on the scale in favor of liberal policies that don’t work for the majority, but that enrich the left-wing international establishment. That basic fact explains much of what goes on in contemporary politics.