Chancellor Kwasi Kwarteng must use an October 31 statement on government finances to abandon parts of his proposed tax cuts that caused a "market malfunction" in the UK financial system, the IMF's chief economist said on Tuesday.
“Our advice is that fiscal policy should be cognisant and should be as close to neutral,” Pierre-Olivier Gourinchas said. “In the UK we’ve seen market malfunction and there has been a need for the Bank of England to come in and address that malfunction.
Mr Kwarteng has been told to find spending cuts of more than £60 billion ($66bn) if he is to meet his target to get public finances back under control but there is also increasing pressure to climb down from his projected cuts.
The Institute for Fiscal Studies (IFS) said it was not possible to deliver cuts on that scale through efficiency savings and “trimming the fat” and that it would require major cuts to public services.
“It is very clear that stability can be improved in the financial markets and more broadly with a fiscal package that is consistent with what the Bank of England is trying to do," Mr Gourinchas said.
The Bank of England stepped in with emergency action for the second day running to head off a “fire sale” of UK government bonds after market turmoil triggered by the chancellor’s mini-budget announcement.
The IMF added in its latest World Economic Outlook report that the slowdown of the global economy has intensified since April amid “stubbornly” high inflation.
In the UK, the economy is projected to grow at a rate of 3.6 per cent in 2022, a 0.4 per cent upgrade from the IMF’s previous forecast in July.
However, growth will then fall sharply to only 0.3 per cent in 2023, with the IMF downgrading its forecast by 0.2 per cent from 0.5 per cent.
Only Germany and Italy will see weaker growth than the UK among the world’s advanced economies, with the IMF forecasting a decline for both countries in 2023.
Russia’s economy is expected to contract by 2.3 per cent next year, the biggest fall of all the nations included in the projections.
The UK and other countries have recently increased base interest rates to help tame surging inflation, making borrowing more expensive for households and businesses.
The Bank of England’s interest rate is currently 2.25 per cent and is expected to be raised further at the next meeting of decision-makers in November.
This is set to take a toll next year as consumers cut back on spending and businesses investment less, resulting in slower growth, the IMF said.
The body noted that its forecast was prepared before the government unveiled its mini-budget, which set out sweeping tax cuts including on stamp duty and income tax.
It said: “The fiscal package is expected to lift growth somewhat above the forecast in the near term, while complicating the fight against inflation.”
The specs
Engine: 2.0-litre 4-cylinder turbo
Power: 258hp from 5,000-6,500rpm
Torque: 400Nm from 1,550-4,000rpm
Transmission: Eight-speed auto
Fuel consumption: 6.1L/100km
Price: from Dh362,500
On sale: now
A cheaper choice
Vanuatu: $130,000
Why on earth pick Vanuatu? Easy. The South Pacific country has no income tax, wealth tax, capital gains or inheritance tax. And in 2015, when it was hit by Cyclone Pam, it signed an agreement with the EU that gave it some serious passport power.
Cost: A minimum investment of $130,000 for a family of up to four, plus $25,000 in fees.
Criteria: Applicants must have a minimum net worth of $250,000. The process take six to eight weeks, after which the investor must travel to Vanuatu or Hong Kong to take the oath of allegiance. Citizenship and passport are normally provided on the same day.
Benefits: No tax, no restrictions on dual citizenship, no requirement to visit or reside to retain a passport. Visa-free access to 129 countries.
JOKE'S%20ON%20YOU
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The bio:
Favourite holiday destination: I really enjoyed Sri Lanka and Vietnam but my dream destination is the Maldives.
Favourite food: My mum’s Chinese cooking.
Favourite film: Robocop, followed by The Terminator.
Hobbies: Off-roading, scuba diving, playing squash and going to the gym.
Company profile
Name: Tharb
Started: December 2016
Founder: Eisa Alsubousi
Based: Abu Dhabi
Sector: Luxury leather goods
Initial investment: Dh150,000 from personal savings
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The specs
Engine: 6.2-litre V8
Power: 502hp at 7,600rpm
Torque: 637Nm at 5,150rpm
Transmission: 8-speed dual-clutch auto
Price: from Dh317,671
On sale: now
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Messi at the Copa America
2007 – lost 3-0 to Brazil in the final
2011 – lost to Uruguay on penalties in the quarter-finals
2015 – lost to Chile on penalties in the final
2016 – lost to Chile on penalties in the final
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The Year Earth Changed
Directed by:Tom Beard
Narrated by: Sir David Attenborough
Stars: 4
A little about CVRL
Founded in 1985 by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, the Central Veterinary Research Laboratory (CVRL) is a government diagnostic centre that provides testing and research facilities to the UAE and neighbouring countries.
One of its main goals is to provide permanent treatment solutions for veterinary related diseases.
The taxidermy centre was established 12 years ago and is headed by Dr Ulrich Wernery.
ILT20%20UAE%20stars
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What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
THE CLOWN OF GAZA
Director: Abdulrahman Sabbah
Starring: Alaa Meqdad
Rating: 4/5
