The pressure on the public finances continues to mount as the International Monetary Fund (IMF) has urged UK Chancellor Rachel Reeves to consider difficult reforms. These include ending the state pension triple lock and introducing charges for NHS services, particularly for higher earners.
In its final report on the UK economy, the IMF warned that Reeves’ plans could be derailed by slow growth or global instability. The Washington-based body praised the fiscal rules set last October but emphasized the need to build in more financial flexibility.
According to the IMF, the current fiscal rules are solid but could become ineffective if unexpected shocks hit the economy. It noted that tighter spending or new tax hikes might not be enough if the UK lacks financial headroom.
The report suggested Reeves should plan her next budget with more caution. It advised against frequent tax changes, recommending a steadier approach with built-in fiscal buffers.
Reeves aims to drive growth through structural reforms, but the IMF warned this will be tough. A sluggish global economy, trade disruptions, and limited resources could all threaten progress.
Adding more pressure on the public finances, the UK’s ageing population will drive up health and pension spending in the coming decades. By 2050, these costs could increase by 8% of GDP—well above the 5.5% average across advanced European countries.
To address this, the IMF proposed tying state pensions to earnings alone. This would end the triple lock, which currently guarantees yearly rises of at least 2.5%, inflation, or wage growth—whichever is higher.
It also urged the government to explore co-payments in the NHS. These would require higher earners to contribute more toward their healthcare, while protecting those on lower incomes.
The IMF added that expanding means testing for benefits could help target support more efficiently. These reforms, while politically sensitive, could ease long-term fiscal pressure.
Despite the criticism, Reeves responded confidently. She said the IMF supports her economic strategy and recognizes the difficult situation the government inherited.
However, as the autumn budget looms, pressure on the public finances continues to grow. Reeves may need to raise taxes again after already increasing social security contributions in 2024.
The IMF’s warning highlights the scale of the challenge ahead. Without reforms, the UK risks falling short of its fiscal goals in an uncertain global landscape.
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