The Institute for Fiscal Studies recently recommended downplaying the Spring Statement with a looser borrowing target, to prevent the need for constant fiddling of tax and spend plans.
The chancellor is following two main rules for government finances, which she has repeatedly said are “non-negotiable”. They are:
The IMF, in general, praised the UK economy and recent “bold agenda” of pro-growth reforms, saying its medium-term borrowing plans were “credible” and that the UK’s trade deals meant it was well placed to ride out current global uncertainties.
But it said risks to the government’s strategy must be “carefully managed” in a nod to the relatively small buffer that the UK has to deal with shocks to the economy.
“Fiscal rules could easily be breached if growth disappoints or interest rate shocks materialise,” the IMF said.
To head off this possibility, it suggested the government should consider replacing the state pension triple lock , widening the applicability of VAT, means-testing more benefits, and co-payments for richer users of the NHS.
Responding to the IMF’s report, Reeves said: “Today’s IMF report confirms that the choices we’ve taken have ensured Britain’s economic recovery is underway, and that our plans will tackle the deep-rooted economic challenges that we inherited in the face of global headwinds.
“Our fiscal rules allow us to confront those challenges by investing in Britain’s renewal.”