IMF advises UK to cut pensions and leave bankers alone
The International Monetary Fund recommended that the head of the British budget, John Healey, bet on reducing pension and social spending, rather than raising taxes for banks. The Guardian writes about it. We are talking about the budget, which will be presented later this month. Helge Berger, deputy director of the IMF’s European Department, was asked about bank taxes after the newspaper published Healy’s plans to replenish the coffers at the expense of the banking sector.
The International Monetary Fund recommended that the head of the British budget, John Healey, bet on reducing pension and social spending, rather than raising taxes for banks. The Guardian writes about it. We are talking about the budget, which will be presented later this month. Helge Berger, deputy director of the IMF’s European Department, was asked about bank taxes after the newspaper published Healy’s plans to replenish the coffers at the expense of the banking sector.
Berger replied that, given the current high ratio of tax revenue to UK GDP, it would be wiser to “emphasize” spending cuts. If additional revenues are still needed, he called the starting point for real estate tax reform or value added tax. When taxes are around 40% of GDP, which is historically high for a country, it makes sense to balance these measures with more active spending actions, he said.
As examples, Berger cited the triple-guarantee mechanism for raising pensions, which Labour has already promised to reform, and “more targeted provision of social benefits.” He pointed out that the focus should be on this and not on the tax in question. Berger spoke in Bangkok, where the IMF held its annual meetings this week.
Lobbyists in the City of London have launched a campaign warning that rising taxes will force banks to cut lending sharply. This will hit the economy and may even push some credit institutions to move jobs and operations abroad. UK Finance CEO David Postings sent Healy a letter with a copy to Prime Minister Andy Burnham on 12 October. It came just days before news of the planned tax hike came out.
In the letter, Postings cited the results of a study commissioned by a lobbying organization. If the Conservatives reversed the tax cut on banks and returned the rate from 3% to 8%, the UK’s real GDP would be £1.2 billion lower by fiscal year 2029-2030 than it would have been otherwise.
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