Under pressure: Chancellor Jeremy Hunt
Britain will face harsh questions on rising levels of labour inactivity and cuts in national insurance contributions when inspectors from the International Monetary Fund (IMF) arrive next month.
It comes as concerns grow at the number of those signed off work due to long-term sickness – which has hit a record 2.8m.
‘One area we need to look at is the quality of health care and another is the way disability is reported,’ Helge Berger, a top IMF official for Europe said.
His comments came in the wake of Prime Minister Rishi Sunak’s pledge to crack down on the surging health benefit bill in the UK.
‘Most of the growth momentum in the UK has come from an expanding labour force from migration,’ over the last two years Berger claimed.
He suggested that with a rising number of Britons out of work, productivity was suffering and the whole area needed a close examination.
A full delegation from the IMF will spend up to two weeks in Britain in what is known as an ‘Article 4’ inspection and will meet with the Chancellor Jeremy Hunt and the Treasury, the Office for Budget Responsibility as well as other officials and think-tanks as they go about their work. It might also be expected to meet with the Opposition leadership.
The Chancellor has sought to kick-start the effort to reduce economic activity by seeking tougher tests for eligibility to health benefits which are considerably more generous than unemployment and universal credit benefits.
He also has sought to speed up pathways back into the workforce.
But the March unemployment data showed that economic inactivity is still rising in spite of nearly 1m work vacancies.
A clash of views between the Government and the IMF looks certain after the Chancellor’s successive 2 per cent cuts in National Insurance Contributions for employees.
The IMF has made it clear in Washington that the priority for the Western democracies is to build ‘fiscal buffers’ – budget room to deal with future financial crises – following the big increases in borrowing and debt as a result of the pandemic and war on Ukraine.
Berger said the IMF’s priority in London would be on ‘fiscal consolidation’ – the Fund’s favoured term for trimming spending and raising revenues.
‘We think this is appropriate given the trajectory,’ the Fund official insisted. The IMF will focus particularly on ‘expenditure on health services’.
Hunt announced measures in the March budget to bear down on health costs by transforming technology in the misfiring NHS and making use of breakthrough using artificial intelligence (AI).
The Fund suggested that the most efficient way of dealing with revenue shortfalls is to close loopholes – a policy favoured by Shadow Chancellor Rachel Reeves. It also favours taxation on wealth.
The Chancellor began the process of repairing the tax base in the budget.
He abolished non-domicile status for UK residents with overseas credentials.
Reeves has gone further advocating a harsher regime with less escape routes.
She also favours clamping down on tax reliefs for North Sea oil firms.
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